Trade deficit down 9.1% y/y excluding c-hepatitis medicine imports in 9M15
In September 2015, exports decreased 22.3% y/y to US$ 186.3mn, imports fell 12.2% y/y to US$ 637.7mn excluding donated c-hepatitis medicine imports, and the trade deficit decreased 7.2% y/y to US$ 451.4mn (while trade deficit was up 10.5% y/y based on original data), according to foreign trade data released by GeoStat. The major drag on exports came from re-exports (mainly cars) decreasing 44.9% y/y, while Georgian originated exports fell just 11.2% y/y. Exports to the EU increased 8.0% y/y, while exports to the CIS markets shrank 40.8% y/y. In September 2015, a pickup in intermediate goods imports (+6.7% y/y) limited the drop in gross imports, while consumption goods (excluding one-offs) imports decreased 29.9% y/y, with savings from lower oil prices and car imports being the major contributors.
In 9M15, exports decreased 23.6% y/y to US$ 1.6bn, imports fell 14.1% y/y to US$ 5.3bn excluding donated c-hepatitis medicine imports, and trade deficit contracted 9.1% y/y to US$ 3.7bn (while trade deficit decreased 1.3% y/y based on original data). 29% of exports were directed to the EU (+2.1% y/y), 38% to the CIS (-44.2% y/y), and 33% to other countries (-3.4% y/y), out of which Turkey (8.9% of total), and China (5.3% of total) were the largest export destinations. A 65.5% y/y drop in car exports (8.6% of total) had the largest negative impact. Nuts (+6.3% y/y), pharmaceuticals (+46.8% y/y), crude oil (+236.8% y/y), and gold (+64.9% y/y) were the major Georgian exports increasing significantly in 9M15.
In 9M15, pharmaceuticals (+134.8% y/y, including c-hepatitis medicines), petroleum (-27.5% y/y), cars (-34.3% y/y), gases (+21.6% y/y), and copper ores (+12.6% y/y) represented top 5 imported commodities. 33% of imports came from the EU (+6.9% y/y), 25% from the CIS (-6.0% y/y), and 42% from other countries (-19.6% y/y), with Turkey (17.0% of total), and China (7.9% of total) being the largest trading partners.
State budget – resilient revenues in 9M15
State budget total inflows exceeded the plan by GEL 17mn, reaching GEL 7.3bn in 9M15, according to Treasury Service data. Taxes accounted for 77.2% of total inflows or GEL 5.6bn (2.2% above plan), while the rest – GEL 1.7bn (5.7% below plan) was mobilized from grants, credits, privatization and others. Privatization was 20.3% above plan reaching GEL 212.6mn (GEL 73.6mn received from the sale of fixed assets and GEL 136.6mn from the sale of a radiofrequency license).
Total budget outflows reached GEL 6.9bn (4.1% below plan), out of which current spending reached GEL 5.9bn (2.5% below plan), or 84.6% of total, capex reached GEL 417.2mn (23.9% below plan), and the rest (GEL 644.2mn) was spent to meet other obligations.
As a result of resilient revenues, lower current spending and underspending in capex, the state budget overall deficit reached GEL 29.2mn, compared to a planned deficit of GEL 525.9mn and government deposits increased by GEL 349.3mn to GEL 783.7mn as of 1 October 2015.
Producer price index down 1.3% m/m and up 6.4% y/y in September 2015
PPI for industrial goods fell 1.3% m/m in September 2015 after increasing 1.1% in August, according to GeoStat. A 1.4% decrease in prices for manufacturing contributed most to the overall index decline. The prices were also down for basic and fabricated metals (-4.7% m/m), and for food, beverages and tobacco (-1.1% m/m).
Annual PPI retreated to 6.4% in September 2015 after hitting 9.3% in August, with manufacturing prices increasing 7.5% (mostly for foods, beverages and tobacco, basic and fabricated metals, and paper and publishing), contributing +6.11ppts to the overall index change. Prices were up 2.6% y/y in the electricity, gas, and water supply category, contributing +0.41ppts to the overall index change.
Georgia is in a position to improve its credit rating
In a new report that looks into 29 frontier markets, Moody’s identifies a number of benchmarks for assessing progress, such as the ability to implement institutional reforms, government’s fiscal responsibility and relatively rapid GDP growth. But Moody’s says that “only a few” are likely to make much progress over the next 2 to 3 years. Moody’s mentions Georgia along with 2 other countries, that are in a position to see their rating rise, as these countries have sought to control spending and have strengthened institutions to create more stable and predictable environments that are attractive to investors. Moody’s defines frontier markets as sub-investment grade countries that rely primarily on concessional financing to fund their external public debt needs.
