Real GDP grew 2.3% y/y in August 2015 and 2.8% y/y in 8M15
Georgia’s real GDP grew 2.3% y/y in August 2015, according to GeoStat’s rapid estimates. As a result, output growth averaged 2.8% y/y in 8M15. Monthly rapid estimates are based on VAT turnover, fiscal and monetary statistics.
International arrivals up 12.6% y/y in September 2015 and up 6.7% y/y in 9M15
After a 10.0% spike in August 2015, tourist arrivals posted another significant growth of 12.6% y/y to 0.6mn persons in September 2015, according to the Ministry of Internal Affairs. Significantly increased arrivals from Turkey (+9.0% y/y, 24.3% of total), Armenia (+6.9% y/y, 22.1% of total), Azerbaijan (+6.0% y/y, 21.4% of total), and Russia (+12.6% y/y, 16.0% of total) were the major contributors to growth. Arrivals from the EU increased 9.6% y/y in September 2015. In 9M15, total arrivals increased 6.7% y/y to 4.5mn persons.
Inflation rate at 5.2% y/y and 1.1% m/m in September 2015
Annual CPI inflation rate was recorded at 5.2% in September 2015, according to GeoStat. Overall price changes were driven by price increases in food and non-alcoholic beverages (+4.2% y/y, +1.28ppts), health (+9.8% y/y, +0.92ppts), and furnishings and household equipment (+11.6% y/y, +0.73ppts), while prices in the transport category decreased 1.8% y/y.
Monthly inflation rate was 1.1% in September 2015. Price increases in food and non-alcoholic beverages (+1.2% m/m, +0.37ppts), housing, water, electricity, gas and other fuels (+2.4% m/m, +0.23ppts), and a price drop in the transport category (-0.9% m/m, -0.11ppts) were the major drivers of the monthly inflation dynamics.
Tax revenues posted a strong performance in 9M15, up 11.3% y/y
Consolidated budget tax revenues increased 10.5% y/y to GEL 758.9mn in September 2015 and 11.3% y/y to GEL 5.9bn in 9M15 (102.4% of the budgeted amount), according to the Treasury Service. In 9M15, personal income tax revenues grew 15.6% y/y (26.9% of total), profit tax receipts +30.1% y/y (14.5% of total), VAT receipts +6.7% y/y (43.7% of total), excise tax receipts +5.5% y/y (10.6% of total), and property tax +10.3% y/y (3.1% of total). The rest – receipts from customs duties and other taxes – decreased, but they have a minor share in total tax revenues.
Government targets a 3% deficit in the 2016 draft budget
The government has submitted to the Parliament an initial draft of 2016 state budget, which sets economic growth at 3% and GDP deflator at 4.5% for 2016. Fiscal deficit is set at 3% of GDP (the same as in 2015), total expenditures at 29.5% of GDP, and taxes at 25.0% of GDP (both slightly lower than 2015 estimates). Total public debt to GDP is set at 42.8% of GDP (2015E 43.3%), of which external public debt is expected to reach 33.9% of GDP (2015E 34.2%).Current account deficit down 16.2% y/y in 2Q15 to 10.4% of GDP
The current account (CA) deficit decreased 16.2% y/y in 2Q15 to US$ 354.7mn. The major contributor to the CA deficit was a negative trade of goods balance, which improved 7.0% y/y on the back of lower goods imports (-14.3% y/y). The positive balance in services and remittances financed 76.5% of the goods trade deficit, with tourism revenues posting 7.1% y/y growth (US$ 460.1mn) in 2Q15. Net FDI was the largest source (and at the same time contributor) of CA deficit funding and amounted to US$ 314.3mn (+121.1% y/y) or 9.2% of GDP.
Georgia shows improvement in international rankings
According to the 2015-2016 Global Competitiveness Report by the World Economic Forum (WEF), Georgia has moved from 69th position to 66th (among 140 countries).
Georgia scored significantly higher in all indicators in the World Bank’s Worldwide Governance Indicators 2014 report compared to outcomes over 1996-2013. These indicators capture six key dimensions of governance – voice and accountability, political stability and lack of violence, government effectiveness, regulatory quality, rule of law and control of corruption.
