Page 30 - GEORptNov21

5.1.3 Capital flows
Net transfers to Georgian households up 9% y/y in Q3
Net transfers to Georgian households increased by 9% y/y to $540mn in the third quarter (Q1) of 2021, after the much impressive 42.5% surge in the first half of the year (H1).
When compared to the period before the crisis, however, each of the three quarters of 2021 post roughly similar growth rates of more than 30%. Thus, the net transfers in the third quarter of this year rose by 38% compared to the same quarter of 2019, which results in an annualised growth of 17.3% – in line with the 17.3% rate calculated in the same term for Q2 and not far from the 15.4% calculated for Q1.
Notably, the net transfers do not fully reflect the net wage remittances as they have accounted recently for about 80%-90% of the wage remittances as reported under the balance of payments (BoP). It is still a relevant proxy for remittances.
The sharp rise in net transfers (remittances) to Georgia’s households was still insufficient to keep pace with the quick deterioration in the balance of trade with goods and services – which has widened sharply as tourism revenues evaporated.
Thus, the net remittances accounted in 2019 for 111% of the trade gap (goods and services) but only 63% in 2019 – despite the 10% annual rise in the volume of net remittances. The ratio improved to 80% in H1 this year, up from 69% in H1 last year despite the 32.5% rise in net remittances.
The slower rise in remittances (transfers) in Q3 will predictably maintain the remittances to trade gap ratio (trade gap coverage ratio) at relatively low levels in the context of Georgia’s economy.
Consequently, this will require less but still significant interventions from the National Bank of Georgia (NBG), which during 2020 has constantly injected foreign currency in the market to prevent sudden depreciation of the local currency.
30 GEORGIA Country Report November 2021 www.intellinews.com