Page 21 - bne IntelliNews Georgia country report October 2017

Georgia, China sign FTA in Eurasian first
Nevertheless, Georgia continues to run a high trade deficit. It amounted to $3.2bn in the first eight months of this year, and the financing of it continues to weigh on Tbilisi's sovereign balance sheet. An energy-import-dependent country, Georgia's foreign trade deficit has long been an issue for its government. Boosting exports and import substitution form part of Tbilisi's efforts to ensure sustainable economic growth.
Countries in the surrounding Commonwealth of Independent States (CIS), particularly Turkey, Russia and Azerbaijan, accounted for the largest share of Georgia's trade in the eight-month period - 31.9%, followed by the EU with 28.4%.
However, China is becoming an increasingly important trading partner for Georgia. In the given period, it was the third most important source of imports after Turkey and Russia and the third largest export destination. Beijing has now overtaken neighbour Azerbaijan, which provides a large share of Georgia's oil and gas, as the third most important trading partner after Russia and Turkey.
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
21 GEORGIA Country Report October 2017 www.intellinews.com