Oct 4, 2018

Monthly Update: September 2018

Monthly Update

  • Slowdown in some economic partners negatively affects currency inflows, but overall growth of inflows remains in double digits in USD terms. While Georgia’s total exposure to oil prices is reasonably  balanced, higher oil prices still should have somewhat net positive impact on inflows.
  • In USD terms, exports and remittances from Turkey declined in August YoY, however number of visitors went up. Overall growth of exports, tourism and remittances is estimated to be at 4.0% YoY over the same period. Imports from Turkey went down in August reflecting some one-offs and probably also price effect due to sharp lira fall against USD.
  • Real GDP growth stood at 5.5% YoY in Q2 2018 - solid growth especially taking into account the temporary negative contribution from the fiscal spending. According to the initial estimates GDP increased by 2.0% YoY in August. Slowdown is mostly due to negative contribution of fiscal spending and one-offs related to large infrastructure projects and exports. While overall growth rate of inflows is slowing, one-offs in exports were particularly important in August.

  • Consolidated budget tax revenues increased by 10.3% YoY in Aug 2018. Annual change of fiscal balance in July-Aug 2018 stood at -3.7% of 2017 July-Aug GDP, having temporary negative contribution to GDP growth. In Q2 2018 fiscal stance was also contractionary - annual change in fiscal balance in Q2 2018 was -3.6% of Q2 2017 GDP.

  • Exports and imports increased by 16.6% and 8.3% respectively in August. Declining growth rate of trade deficit since March 2018 also continued in August. Slower growth of exports was primarily driven by likely one-off decline of ferro-alloys, fertilizers and petroleum products exports. Excluding these commodities, August YoY exports growth would have stood at 29% instead of 16.6%. Important to mention that this difference was not caused by lower exports to Turkey as without impact of Turkey exports growth would have increased only up to 19.3%.

  • Tourism revenues increased by 11.6% YoY in August and by 20.1% YoY in 8m 2018.

  • Remittances were up by 11.4% in August and by 17.5% YoY in 8m 2018.

  • Current Account deficit almost unchanged QoQ at 9.2% of GDP over the last  four quarters ending Q2 2018.

  • Loan growth remained strong at 19.1% in August driven by business and mortgage lending.

  • Inflation stood at 2.7% in September 2018, 0.4 PP lower compared to the same figure in August 2018, just around the NBG’s 3% target.

  • The real effective exchange rate appreciated by 1.7% MoM and by 4.8% YoY in August. Estimated real effective exchange rate as of October 3  was around at the same level as it was in Apr-May 2018.

  • NBG bought 25 mln USD on the FX market in September and 112.5 mln USD in 2018. 25 mln USD in September is estimated to be up to 2% of September GDP. NBG buying FX indicates that FX inflows are sufficient for higher growth and without negative impact of fiscal spending on domestic demand exchange rate would not have been necessarily depreciated.