Weekly Market Watch
Trade deficit widened in August 2021
Georgia’s robust export growth moderated in August 2021, up 15.7% y/y, compared with a 40.7% y/y growth in July 2021. Reduced copper exports, generally exhibiting monthly volatility, was the major reason behind softer exports, while virus outbreak and pressure on global supply chains might be another reason. Meanwhile, imports growth accelerated compared to previous month, up 26.1% y/y. As a result, trade deficit widened 34.2% y/y. Notably, both exports and imports were also up compared to August 2019 levels (+7.0% and +5.1%, respectively). In August 2021, copper (-23.7% y/y), cars (+9.6% y/y), ferro-alloys (+140.0% y/y), wine (+36.5% y/y) and mineral waters (+23.4% y/y) were the top 5 exported commodities. A 11.9% of exports were directed to the EU (-33.2% y/y), 54.2% to the CIS (+31.5% y/y) and 33.9% to other countries (+23.6% y/y). Petroleum (+87.2% y/y), cars (-28.9% y/y), copper (+135.4% y/y), automatic data processing machines (+194.9% y/y) and pharmaceuticals (+12.4% y/y) represented the top 5 imported commodities in August 2021.
Overall, in 8M21, trade deficit was up by 17.0% y/y to US$ 3.5bn, as exports increased by 26.0% y/y to US$ 2.6bn and imports increased by 20.7% y/y to US$ 6.1bn. Notably, in 8M21 exports and imports were also up by 7.5% and 1.2% compared to 8M19 levels, respectively.
Producer price index up 16.4% y/y in August 2021
Annual PPI for industrial goods came in at 16.4% in August 2021 up from 15.1% in previous month, according to Geostat. Price changes in manufacturing (+18.3% y/y) and electricity, gas, steam and air conditioning (+10.7% y/y) contributed the most to the overall index change in August.
Moody’s affirms Georgia’s rating at Ba2, maintains stable outlook
On 20 September 2021, Moody’s affirmed Georgia’s sovereign credit rating at Ba2, maintaining stable outlook. Based on Moody’s, this action is underpinned by the ongoing development of the fiscal and monetary institutions which has enabled an effective macroeconomic policy response to the pandemic-related downturn. Moody's expects Georgia's economy to grow by 7.3% in 2021, while growth is expected to be at potential of 4-5% over the next few years, driven by increased investment in productivity-enhancing infrastructure in agriculture and manufacturing. Moody’s expects inflation to fall towards the central bank’s inflation target of 3% from 12.8% currently after temporary factors fade and tight monetary policy offsets commodity price and international supply constraint pressures. The current account deficit is also expected to narrow from a peak of 12.5% of GDP in 2020 towards pre-pandemic levels of around 5%, as remittances and non-tourism exports grow solidly and the longer-term benefits of reforms are realized, including reform of the pension system to build domestic savings, based on Moody’s.