Weekly market watch
Real GDP growth was 25.8% y/y in May 2021
Georgia’s economy grew by 25.8% y/y in May 2021, based on Geostat’s rapid estimates, after a 44.8% y/y growth in previous month. Notably, real GDP was also up by 8.8% compared to May 2019 level. Overall, in 5M21, real growth was 11.5% y/y (+4.2% compared to 5M19). In May, growth was broad-based with economic activity up in manufacturing, financial and insurance, trade, real estate, hotels & restaurants, construction and transport sectors. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.
Inflation was 9.9% y/y and 0.7% m/m in June 2021
Annual CPI inflation came in at 9.9% in June 2021, after a 7.7% inflation in previous month, according to Geostat. Core inflation (non-food, non-energy) was 5.9% and core inflation excluding tobacco was 5.8% in June. By categories, annual inflation was mainly driven by price changes in food and non-alcoholic beverages (+8.8% y/y, +2.78ppts), transport (+22.0% y/y, +2.54ppts), housing, water, electricity, gas and other fuels (+10.5% y/y, +1.59ppts), health (+11.6% y/y, +0.90ppts), furnishings, household equipment and maintenance (+10.6% y/y, +0.57ppts) and alcoholic beverages and tobacco (+7.4% y/y, +0.47ppts) categories. On a monthly basis, there was 0.7% inflation in June 2021, reflecting price increase in housing, water, electricity, gas and other fuels (+2.7% y/y, +0.36ppts) category.
Current account deficit improved in 1Q21
Current account deficit decreased by 13.8% y/y standing at 10.7% of GDP in 1Q21, down from 11.2% of GDP in 1Q20, according to NBG. Merchandize trade deficit, traditionally the major contributor to deficit creation, declined by 14.5% y/y to US$ 755.6mn, as exports increased by 4.8% y/y, while imports fell by 4.1% y/y. Positive service balance declined by 90.6% y/y to US$ 23.5mn (0.7% of GDP), reflecting the drop of tourism inflows due to COVID pandemic. Surplus in current transfers amounted to US$ 504.2mn (14.8% of GDP, up 35.9% y/y). Together, services and transfers financed 69.8% of the trade deficit. Notably, other investments at US$ 481.1mn (14.1% of GDP) were key funding source of CA deficit and net FDI stood at US$ 42.3mn (1.2% of GDP).The international reserves were up by US$ 238.6mn.