Page 23 - GEORptOct20

5.1.2​ Current account dynamics
Georgia’s current account gap doubles in Q2
IMF forecasts Georgia’s current account gap will double to 10% of GDP this year
Georgia’s current account gap widened by 97% y/y to $337.1mn in the second quarter, while the gap-to-GDP ratio, taking the quarter’s economic output, soared from 3.9% to 9.4%, the National Bank of Georgia (NBG) has reported.
The balance of goods is the major contributor to the current account and its negative contribution eased in coronavirus (COVID-19) pandemic-afflicted Q2. The deficit decreased by 39.8% y/y to $530.1mn. Imports plunged by 30% y/y.
The positive balance of services, mostly due to exports of travel services, typically offsets the biggest part of the negative balance of goods. Q2 exports of services, however, decreased by 77.7% y/y. The export of travel services decreased by 96.7% y/y to $28.8mn.
Net foreign direct investment amounted to $148.9mn in Q2, accounting for 4.2% of GDP, the NBG also announced.
According to the​ ​World Economic Outlook forecasting​ ​of the International Monetary Fund (IMF), released on April 14, the drop in tourism activity, which is marked out as a main driver behind the anticipated economic slowdown, as well as smaller wage remittances from Georgians abroad will result in the current account deficit widening to 10.1% of GDP this year from 5.1% in 2019. The gap would then narrow to 6.8% of GDP in 2021 under the Fund’s scenario. The country has only just consolidated a downward trend towards smaller external deficits, including via a moderate weakening of the Georgian lari. Thinner currency inflows are likely to re-ignite pressures on the local currency.
Georgia’s current account deficit shrunk by 25% y/y to $897mn in 2019. That accounted for 5.1% of the year’s GDP, the smallest value in absolute terms since 2005, according to data published by the country’s central bank under BPM5 methodology.
23​ GEORGIA Country Report ​October 2020 ​ ​www.intellinews.com