BAKU, Azerbaijan, Sept. 6
By Tamilla Mammadova – Trend:
Exports and credit continued to contribute to higher growth in July 2021 in Georgia, though combined with only relative moderation in remittances and imports, Trend reports via the TBC Capital.
July growth came in at a strong 9.9 percent year-on-year in Georgia and 3.9 percent when compared to 2019.
"Nevertheless, the rebound was weaker compared to around 15 percent expected in our 10.5 percent scenario for the full 2021 year," the report said.
In fact, the drivers remained solid and, therefore, only some moderation was projected after the 18.7 percent expansion in June. Namely, exports and credit continued to contribute to higher growth, though combined with only relative moderation in remittances and imports.
While the fiscal stance was contractionary with around 277 million lari ($89.1 million) lower deficit, the year-on-year recovery in tourism inflows of around $200 million should have outweighed the effect, even considering around 40 percent import component in the tourism expenditure. The slowdown in record-high year-on-year GDP growth on the back of the COVID-19 resurgence and higher base effect was well expected, though from August through September, rather than in July.
As for the sectors, the year-on-year growth was observed in manufacturing, financial and insurance services, trade, transportation and storage, and hotels and restaurants, while, mining and quarrying and construction experienced a contraction, with the latter having a strong downward effect on GDP, likely on the back of weaker activity in public infrastructure.
Inflation pressures continued to rise in August with a 12.8 percent year-on-year and 0.7 percent month-on-month increase in consumer prices, in line with expectations. The largest contributors were food, transportation, and utilities, explaining most of the year-on-year inflation. At the same time, other category prices were also higher as inflation is quite widespread.
While August 2020 relatively low base effect contributed to the increase in annual inflation, the latest monthly seasonally-adjusted inflation is also well above the 3 percent target, though more moderately when compared with the previous two months. Monthly inflation should moderate further on the back of the recent lari appreciation and broadly stable commodity prices, however, the strong rebound in the economy also should be taken into account. In any case, the double-digit year-on-year inflation by the end of 2021 of around 13 percent already looks like a materialized scenario.
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