Page 22 - GEORptMar20

Trade deficit in Georgia diverges from narrowing trend in Q4
The narrowing of Georgia’s trade deficit came to a halt around August last year. The trend had been seen since the end of 2018 but the pattern changed as imports went back into an expansion cycle, according to data from national statistics office Geostat.
The 12-month trade deficit has stagnated at just below $5.3bn (equivalent to more than 30% of GDP) since August. It peaked at $5.9bn in October and gradually fell afterwards. On the upside, export growth remains robust and the net import of goods is safely offset by tourism revenues, wage remittances and foreign direct investments resulting in a sustainable balance of payments structure. Exchange rate flexibility remains critical in addressing external shocks (making for a sudden drop in exports) particularly given rising uncertainties in the region.
The trade gap inched up marginally by 0.3% y/y to $1.5bn in Q4, after contracting over the previous four quarters—by double digit rates during the first two quarters of 2019 and by 6.5% y/y in Q3. On the upside, strong growth in exports was maintained; they were even outstanding in Q4 at +15.9% y/y. Nevertheless, even a moderate expansion of imports (+5.6% y/y in Q4)can offset such gains and maintain constant pressure on the deficit.
As Georgia enjoys significant incomes from tourism and wage remittances, such trade deficit levels are not necessarily unsustainable. The country’s revenues from international tourists moved up by a modest 1.2% y/y in the first 11 months of the year to $3.05bn, according to preliminary data from the National Tourism Administration. Tourism revenues rose by over 18% y/y to $3.2bn for the full year of 2018 and a marginal advance in 2019 would bring them to around 20% of GDP for the year.
Wage remittances typically hover at around 10% of GDP—matching, on the top of the tourism revenues, the net import of goods. With foreign direct investments still registering a significant value ($900mn in Jan-Sep), albeit significantly weaker compared to previous years, the balance of payments looks quite sustainable, supporting the central bank’s view that the exchange rate can remain stable. Exchange rate flexibility remains important in strengthening investors’ confidence, though.
22​ GEORGIA Country Report​ March 2020 ​​www.intellinews.com