Page 22 - GEORptMar21

IMF disburses $114mn tranche to Georgia
The executive board of the International Monetary Fund (IMF) on December 16 completed the seventh review of Georgia’s economic reform programme supported by its Extended Fund Facility (EFF) and approved the disbursement of $114mn to help the country meet balance of payments needs stemming from the coronavirus (COVID-19) shock. The move brought disbursements under the EFF to $578mn.
IMF deputy managing director and chair Tao Zhang noted that the National Bank of Georgia (NBG) had managed to anchor inflation pressures via moderately tight monetary policy, while also protecting exchange rate flexibility. Georgia’s monetary stance and foreign-exchange interventions “may need to be sustained to prevent disorderly market conditions and bring inflation towards the 3% target,” Zhang said, adding that macroeconomic policy discipline and donor support should maintain foreign exchange reserves “at an adequate level.”
The central bank on December 9 decided to keep its key refinancing rate unchanged at 8.0%.
Despite low inflation of 3.8%, which is not expected to budge much in coming quarters, the NBG rate-setters found grounds to keep to their hawkish policy rate and even mentioned the option of further hiking it.
“According to the current estimates, a tight monetary policy may be necessary for longer, subject to inflation expectations and the dynamics of economic activity. Depending on the economic developments, the [monetary policy] Committee does not rule out the need for an increase in the interest rate in the future,” a press release read.
The central bank has sold foreign exchange reserves of $843mn in 25 auctions held since March.
The IMF statement said Georgia’s fiscal response to the COVID-19 pandemic helped reduce its economic and social impact, with the 2021 state budget further aiding the economic recovery.
Moreover, it highlighted structural reforms, including in the judiciary, as a path to improving the business environment and enhancing private sector-led growth.
Under the EFF arrangement, Georgia has so far received special drawing rights to foreign exchange reserve assets of some $585mn.
5.1.1 Import/export dynamics
Georgia’s domestic exports up 3.5% y/y in 2020
Georgia’s domestic exports, which exclude exports of goods that are re-exported, increased by 3.5% y/y in 2020 to more than $2.4bn, driven by exports of metal ores to China, according to data released by statistics office Geostat.
Direct exports have now been on the rise for four years, moving up 50% since 2016. Total exports in 2020, however, contracted by 12% y/y to $3.34bn. Georgia’s direct exports to China soared by 127% y/y to nearly $460mn (19% of the total). Total exports were reported at $476mn (113% up y/y).
By items exported, the most marked increases was posted in copper ores and concentrates (+12.3% to $729mn) and precious metal ores and concentrates (+751% y/y to $90mn).
Total imports decreased by 15.9% y/y last year to $8bn, resulting in a trade gap of $4.66bn, down from $5.72mn in 2019.
22 GEORGIA Country Report March 2021 www.intellinews.com