S&P Global Ratings: Georgia's primary income deficit increases
Baku, Azerbaijan, October 16
By Tamilla Mammadova – Trend:
The deficit of primary income in Georgia has increased, Trend reports with reference to S&P Global Ratings.
In 2016-2018 it was about 5 percent of GDP (compared with an average of 2 percent in 2013-2015).
“But even taking into account this deterioration, Georgia, in our opinion, is less sensitive decrease in investor confidence, since the share of market portfolio financing that Georgia receives is small compared to the volume of foreign direct investment (FDI) and debt obligations attracted on favorable terms,” said the report.
“Following the completion of the pipeline for gas exports funded by foreign investors, FDI inflows declined and were expected to average a little over 7 percent of GDP during our forecast period (compared with over 11 percent in 2014 -2017)”, S&P said.
Since a significant portion of imports was associated with FDI, S&P believes that the current account deficit will continue to decline and will amount to less than 7 percent of GDP in 2019 and an average of 6.3 percent of GDP by the end of 2022.
The growth in services exports, reflecting tourism revenues and transit duties, should also help stabilize the deficit in foreign economic indicators, partially offsetting the growth in interest and dividends paid on external obligations.
In early 2019, in order to accumulate foreign exchange reserves, the central bank introduced a sale option, which allows banks to sell the foreign currency of the National Bank of Georgia (NBG) during periods of appreciation of lari.
The NBG also continues to buy foreign currency at auctions. To date, the net volume of foreign currency acquired by the NBG is $228 million. In June 2019, the NBG's foreign exchange reserves reached a maximum level of $3.74 billion (which is 2.5 times higher than in 2008), but then fell slightly after the sale of foreign currency in August-September.
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