Page 22 - GEORptJul19

5.1.2 Current account dynamics
Georgia’s current account deficit halves in Q1 on strong exports
Georgia’s current account (CA) deficit amounted to $227mn in the first quarter of 2019, 48% down y/y according to the central bank reporting under BPM5. The country's CA deficit narrowed in 2018 compared to 2017, but remains at a still high level of 7.7% of GDP ($1.24bn) and its dynamics depends to a large extent on the revenues generated by tourism.
Exports of goods increased by 12.5% y/y to $1.1bn, while imports of goods contracted by 3.3% y/y to $1.9bn. Notably, the balance of trade with goods improved despite the nominal and real strengthening of the local currency against a trade of currencies reflecting the country’s foreign trade, in the first quarter of this year compared to the same period of 2018.
The balance of goods remains the major contributor to the current account. Trade of goods deficit decreased, however, by 18.9% y/y and amounted to $799mn in the first quarter.
The positive balance of services (mostly due to exports of travel services) partially offsets the negative balance of goods. Exports of services increased by 3.4% and imports by 10.4%. The balance of travel services is the largest positive component of the services account. Export of travel services increased by 5.0% y/y and amounted to $578mn.
The positive balance of the current transfers also reduced the current account deficit. The credit of current transfers decreased by 7.0% totaling $346mn. A significant contribution was made by the smaller profits reported and retained by the foreign direct investment companies: $87mn, some $105mn less than in the first quarter last year.
This had an effect on foreign direct investments as well. Gross foreign direct investments in Georgia decreased by 6.35 y/y to $281mn in the quarter, but equity investments increased by 28% y/y to $159mn. Re-invested earnings were smaller in the quarter, dragging down the headline FDI figure.
22 GEORGIA Country Report July 2019 www.intellinews.com