Balance of Payments of Georgia (II Quarter 2014)

Balance of Payments of Georgia (II Quarter 2014)

01 October, 2014

Balance of Payments statistic is compiled according to the methodology provided by the IMF's "Balance of Payments Manual, Fifth edition".

The current account deficit in the second quarter of 2014 amounted to 385.7 million USD (679.8 million GEL or 9.5 percent of second quarter GDP).

Trades of goods have traditionally contributed to the bulk of the negative current account balance. After improving in 2013, the negative balance of goods has increased again, by 18.3 percent annually and by 22.0 percent quarterly, to equal 1.0 billion USD (1.8 billion GEL). The growth rate of goods exports significantly slowed, equaling 4.7 percent. This was primarily due to the decrease in the export of automobiles, which have been the major export item since 2011. In contrast, the growth rate of imports of goods rose compared to 2013, increasing by 11.1 percent year-on-year and amounting to 2.1 billion USD (3.7 billion GEL).

The positive balance of services partially offsets the negative balance of goods. Although, the balance of services decreased by 7.6 percent annually in the second quarter of 2014, to equal 347.2 million USD (611.8 million GEL).This was a result of the higher growth of imports as compared to exports. The export of services increased by 2.3 percent annually and amounted to 746.0 million USD (1.3 billion GEL), whereas the import of services increased by 12.7 percent annually, equaling 398.8 million USD (702.9 million GEL). Among services, travel had the largest positive balance, rising by 1.1 percent to 359.0 million USD (632.7 million GEL). The low growth of tourism income in May-June was result of the earth slide in Dariali that caused blockage of the road.

The negative balance of income equaled 62.5 million USD (110.2 million GEL). Income credit amounted to 220.3 million USD (388.2 million GEL), up by 1.3 percent annually; while income debit decreased by 2.4 percent year-on year, totaling 282.8 million USD (498.4 million GEL).

Current transfers, the largest positive component of the current account, amounted to 366.3 million USD (645.7 million GEL). This 2.5 percent decline was due to a decrease of both government and private transfers. The inflow of current transfers equaled 397.6 million USD (700.8 million GEL), while the outflow amounted to 31.3 million USD (55.1 million GEL).

Net capital transfer inflows in the second quarter equaled 30.5 million USD (53.8 million GEL).

Net foreign direct investments, the most significant item for financing the current account deficit, amounted to 120.1 million USD (211.6 million GEL)1 accounting for 2.9 percent of GDP. The decline in foreign direct investment was due to the decrease of direct investment (with a more than 10 percent share) in the financial sector - basically, international organizations sold their shares. At the same time, portfolio investments in equity (with a less than 10 percent share) increased significantly. In other words, direct investments were replaced by portfolio investments. During the second quarter of 2014, portfolio investment in equity amounted to 199.7 million USD. As for direct investment in other sectors, this increased significantly in the transport and communication, manufacturing and real estate sectors. Direct investments in sectors other than the financial sector increased by 43.8 percent.

Of the total foreign direct investments made to Georgia, 56.8 percent invested in equity capital; 39.6 percent were comprised of reinvested earnings, and 3.6 percent by other capital.

The balance of portfolio investments amounted to 206.5 million USD (363.9 million GEL). Portfolio investment assets increased by 2.7 million USD (4.7 million GEL). Meanwhile, liabilities increased by 209.2 million USD (368.6 million GEL).

The negative balance of other investments amounted to -98.8 million USD (-174.1 million GEL). Out of which, assets increased by 100.1 million USD (176.5 million GEL) due to the increase of deposits and trade credits. At the same time, liabilities slightly increased by 1.4 million USD (2.4 million GEL).

Official reserve assets decreased by 103.4 million USD (182.3 million GEL) due to transactional changes and amounted to 2.5 billion USD (4.4 billion GEL), which covers three months of imports.

The presented statistical information is published on the website of the National Bank of Georgia under the heading "Statistics":

1FDI data slightly differs from Geostat's preliminary statistics. FDI data usually rises after the annual survey, due to corrections made to the quarterly profit-loss data. According to the IMF's methodology and the recommendations of the 2012 IMF ROSC mission, BOP quarterly statistic is adjusted in order to correct this problem. After the completion of the annual survey, the final FDI data is released by Geostat and the BOP FDI record is adjusted accordingly.