Page 31 - GEORptAug21

payments, the government borrowed heavily last year.
Georgia currently owes $20.3bn in external debt, according to NBG data. The external debt to GDP ratio hit 125% in 2020.
Fitch Ratings in February forecast that Georgia's current account deficit will widen to 12.5% of GDP in 2021, before narrowing to 7.9% in 2022. A domestic-driven recovery and a weak outlook for tourism would mean a higher pace of growth in imports than exports, it said.
5.1.3 Capital flows
Money transfers up by 19.3% y/y in June.
In June 2021, money transfers increased by 19.3% y/y to a record high of $201.9mn, after growing 42.4% y/y in previous month, according to the central bank. Notably, remittances were significantly up by 40.6% compared to June 2019 level. From major remitting countries, money transfers increased strongly from Russia (+20.0% y/y, 19.4% of total), Italy (+18.3% y/y, 15.7% of total), USA (+24.6% y/y, 12.4% of total) and Israel (+12.8% y/y, 7.7% of total). Overall, in 1H21 money transfers were up 40.8% y/y to $1.1bn (+34.4% compared to 1H19).
Some 94.6% of the money transfers total from abroad came from 18 largest partner countries, with the volume of transfers from each of these countries exceeding $1mn in July. In July 2019, the share of these 18 countries was equivalent to 93.4% of the total volume of money transfers.
Aggregated net transfers of money to Georgia in the 12-month period ending May increased to $1.89bn. That's 31%, or over $450mn more, compared to the previous 12-month period.
The comparison is skewed by the lockdown period in April last year when the volume of transfers plunged amid mobility constraints. Comparing the transfers in Q1 this year with the same period a year ago avoids that issue - and the robust 33% y/y advance confirms a genuine upward trend in the volume of money transfers.
In May alone, net transfers increased by 39% y/y to $164mn. Some 17% of this came from the Russian Federation and Italy (shares are calculated for gross transfers), with the US accounting for nearly 13% and Greece for nearly 11%. Israel is another significant contributor to money transfers to Georgia, with nearly 8% of total gross transfers in May originating there.
By any metric, the transfers to Georgia therefore increased significantly in the post-lockdown period and they represent a factor that played a key role in the foreign exchange market.
The money transfers have remained, since last July, at around $160mn per month - compared to the $130mn recorded on average in 2019.
The supplementary $450mn in money transfers entering Georgia in the 12-month period ending May can be placed on top of another $460mn - the decrease in the trade deficit over the same period of time.
This $910mn “currency cushion” accounts, however, for only one-third of the $2.7bn plunge in tourism revenues that Georgia incurred in 2020 as the coronavirus pandemic devastated international travel. But it was enough to provide a certain stability to the local currency, the Georgian lari (GEL), while
31 GEORGIA Country Report August 2021 www.intellinews.com