Current account deficit of Georgia to narrow

Business Materials 17 August 2019 15:18 (UTC +04:00)

Baku, Azerbaijan, August 17

By Tamilla Mammadova – Trend:

The current account deficit of Georgia will narrow further to an average of 5.3 percent over 2019-2021 versus 3 percent, as a slowdown in consumer lending and rising domestic savings following the launch of the funded pension pillar ease pressure on imports, Trend reports with reference to web-site of Fitch Rating Agency.

The Russian flight ban will partly reverse the recent rapid improvement in tourism revenues, with international visitors' growth slowing to 4.3 percent from 19.9 percent, but Fitch expects continued growth over the forecast period.

Net inflows of foreign direct investment (FDI) in Georgia are forecast to cover the current account deficit each year. Net FDI is projected to average 5.9 percent of GDP over 2019-2021, after declining to 5.5 percent in 2018 from 10.8 percent in 2017 due to the completion of major infrastructure and energy projects.

Georgia's ratings are supported by governance and business environment indicators that are above the current medians of 'BB' category peers, and a track record of macroeconomic resilience against regional shocks

As reported, confidence in the authorities' economic strategy is also anchored by an IMF Extended Fund Facility (EFF) program. Georgia's external finances are significantly weaker than the majority of 'BB' category peers.

Dynamic tourism exports and lower import growth following the completion of large energy projects led to a narrowing of the current account deficit to 7.7 percent of GDP in 2018, from 8.8 percent in 2017.