Page 20 - bne IntelliNews Georgia country report November 2017

5.1.2 Current account dynamics
Georgia’s current account deficit drops 40% y/y in H1 on tourism, exports
Georgia's current account deficit dropped to 7.4% of GDP at end-June, down from 12.3% a year earlier, the country's central bank reported on September 29. In nominal terms, the deficit contracted by 39.4% y/y to $276.2mn, the report added.
The small country's economy is reliant on imports of oil and gas and added-value goods like machinery, therefore a high trade deficit financed partly through borrowing and investments continues to be a problem for Tbilisi, even as its economy has flourished.
The main contributor to the decline in the deficit was services, in which Georgia has a positive balance of $507.3mn largely thanks to tourism revenues, which increased by 27.8% y/y to $658.7mn. Meanwhile, the merchandise trade deficit stood at $858.3mn at end-June, down 12.7% y/y thanks to a 25.4% annual increase in exports.
Net foreign direct investments, in the meantime, dropped by 13.4% y/y to $316.9mn in the first half-year. They were geared primarily at the transport and construction sectors.
5.1.3 Capital flows
Remittances to Georgia up 20.1% y/y in July
Remittances to Georgia increased by 20.1% y/y to $120.9mn in July, the country's central bank said in a report issued on August 15.
The sums are an important source of revenue for many Georgians who are underemployed or unemployed and rely on transfers from relatives working abroad. Officially, Georgia's unemployment stood at 12% in 2015, but observers believe that as much as half of the workforce is underemployed and engaged in either subsistence agriculture or small business ownership.
In 2015 and early 2016, remittances dropped as a result of a depreciation of the Russian ruble and Turkish lira and the economic slowdown in Russia and Turkey, two of the largest sources of remittances.
Russia accounted for a third of total remittances sent in July, followed distantly by the US with $12.7mn, Italy ($12.1mn), Greece ($10.6mn), Israel ($10.5mn) and Turkey ($9.3mn).
5.1.4 Gross international reserves
Gross international reserves in Georgia amounted to GEL3,025mn in September, up from GEL2,915.2mn m/m and GEL2,858.2mn a year ago.
20 GEORGIA Country Report November 2017 www.intellinews.com