Page 23 - bne IntelliNews George country report Sept 2017

Georgia, China sign FTA in Eurasian first
Nevertheless, Georgia continues to run a high trade deficit, which amounted to $2.7bn in the first seven months of this year, and the financing of which will continue to weigh on Tbilisi's sovereign balance sheet.
An energy-importing country, Georgia's foreign trade deficit has long been an issue for its government. Boosting exports and import substitution is part of Tbilisi's efforts to ensure sustainable economic growth.
The Commonwealth of Independent States (CIS) was the country's main trade partner in the reporting period, accounting for 39.4% of exports and 29.3% of imports, followed by the EU, which accounted for 23.4% of exports and 28.4% of imports respectively.
In terms of individual trading partners, Georgia's top five were Turkey (9.6% of exports and 17% of imports); Russia (14.8% of exports and 9.2% of imports); China (8.9% of exports and 8.3% of imports); Azerbaijan (7.3% of exports and 7.6% of imports) and Ukraine (3.3% of exports and 5.3% of imports).
Commodities like copper ore and ferro-alloys topped the list of Georgia's top exports, followed by car re-exports, wine and pharmaceuticals. Conversely, the top import product categories comprised oil and petroleum, motor cars, pharmaceuticals, copper ore and concentrate, telephones and wheat.
Georgia and China signed a bilateral free trade agreement (FTA) on May 13, six months after finalising negotiations, according to civil.ge. The agreement is expected to take effect at the end of 2017 or in early 2018. Once it does, Georgia will exempt some 96.5% of Chinese products from tariffs, while China will do the same for 90.0% of Georgian exports.
The negotiations on the FTA took less than a year and the agreement represents China's first in the Eurasian region.
5.1.2 Current account dynamics
5.1.3 Capital flows
The country has run high current account deficits (CAD). In 2016, the CAD amounted to 13.3% of GDP, while the average in countries within the same ratings category is 2.4% of GDP. While Tbilisi has also attracted above-average foreign direct investment (FDI) of 9.8% of GDP in 2016, the CAD is pushing up the already high external debt.
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
23 GEORGIA Country Report September 2017 www.intellinews.com