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GDP), followed by a recovery in the service balance (reflecting the gradual rebound in tourism revenues, amounting to $1.2bn in 2021, 38.1% of the 2019 level).
Meanwhile, the merchandise trade deficit, traditionally the major contributor to deficit creation, widened by 18.8% y/y to $3.8bn, as exports increased by 27.4% y/y and imports were up 23.8% y/y. Notably, other investments at $1.8bn (9.5% of GDP) and net FDI at $830.8mn (4.4% of GDP) exceeded the current account deficit by 1.4x y/y, resulting in reserves accumulation of $452.6mn in 2021.
5.1.3 Capital flows
Money transfers to Georgian households surge by 26% in first 10 months
The money transferred to Georgian households through channels such as Western Union or Zolotaia Korona increased by 26% y/y to $1.91bn (over 10% of GDP) in January-October, the National bank of Georgia announced.
These wage remittances sent by Georgians living and working abroad have significantly contributed to the resilient domestic demand that propped up economic growth but also consumer prices this year and in 2020. Compared to the first 10 months of 2019, before the crisis, gross transfers to Georgian households surged by 36%.
In net terms, after deducting the money sent by Georgian households through the same channels ($251mn), the increase was similar: +26.2% y/y to $1.66bn (just under 10% of GDP) in January-October 2021.
In October alone, the gross and net transfers to Georgian households slowed to an annual growth rate of only 13.7% y/y (to $207mn) and 11.7% y/y (to $176mn) respectively. Compared to the pre-crisis period, in October 2019, the transfers were, however, roughly 35% larger in both gross and net terms.
This year, as well as in the previous years, the largest part of the transfers to Georgian households came from Russia: $337mn (+16% y/y). The next largest sources of transfers to Georgia were Italy ($316mn, +31% y/y), the US ($234mn) and Greece ($201mn).
30 GEORGIA Country Report July 2022 www.intellinews.com