Page 29 - GEORptNov21

Georgia’s current account gap keeps exchange rate under pressure in H1
(reflecting the rebound in tourism revenues), up 26.4x y/y to $143.9mn.
Meanwhile, merchandise trade deficit, traditionally the major contributor to deficit creation, widened by 23.3% y/y to $755.6mn, as exports increased by 49.0% y/y and imports by 42.9% y/y. Notably, other investments at $318.2mn (6.7% of GDP) were key funding source of CA deficit, while net FDI stood at $148.0mn (3.1% of GDP) in 2Q21.
Overall, the CA deficit came in at 9.2% of GDP in 1H21, down from 11.3% of GDP in 1H20.
The current account deficit of Georgia narrowed by 8.8% y/y to $381mn in Q2 and by 9.7% y/y to $747mn in H1, the National Bank of Georgia has announced. The change reversed only a small part of the 2.7-fold deterioration seen in the COVID-19-hit Q2 last year, when the country’s tourism revenues evaporated overnight, to only slightly improve in 2021.
The tensions within the balance of payments have thus eased compared to last year, and the central bank has comparatively smaller problems to mitigate in relation to the exchange rate. In turn, the energy prices resulted in the meantime in mounting inflationary pressures.
In a broader perspective, Georgia’s current account pattern of shrinkage, visible before the crisis, discontinued. Compared to similar periods of 2019 before the COVID-19 crisis, the country’s external balance measured by the CA deficit has, however, deteriorated: by 124% (from $170mn in Q2, 2019) in Q2 and by 80% (from $416mn in H1, 2019) in H2.
The tourism revenues, an important element of Georgia’s current account balance, have somehow improved from the nearly null and void outcome last year while remaining at very low levels com[ared to the previous years. Thus, the net income from travel soared 14 times y/y to $209mn in H1 and 3.4 times to $243mn in H1. Inter alia, seasonally, the country boasts the biggest tourism revenues in Q2. Speaking of the first half of the year, though, tourism revenues lagged a massive 79% (down 5-fold) compared to H1, 2019.
The net import of goods (trade deficit with goods), the most important element of the CA, moved within narrower limits - it increased by 5.1% y/y and contracted by 6.8% compared to H1, 2019, to $1.57bn in H1 this year.
Wage remittances, which offset (and finance) an important part of the trade gap, consistently increased: by roughly the same rate of 31% compared to both H1 last year and H1, 2019 to $1.17bn in the first half of this year.
29 GEORGIA Country Report November 2021 www.intellinews.com