Government creates GEL 2.7bn fiscal buffer in the 2020 revised budget document
The Georgian government has submitted to the parliament the 2020 revised budget document, which incorporates the fiscal parameters agreed with IMF, US$ 1.5bn donor funding and fiscal stimulus measures for affected businesses and households to respond to COVID-19 pandemic associated economic crisis. Budget framework assumes -4.0% GDP growth in 2020 and sets deflator at 4.8%. Fiscal deficit is projected to increase to 8.5% of GDP due to the revenues shortfall (GEL 1.45bn reduction compared to the initial budget) and rise in expenditures for anti-crisis measures (GEL 1.4bn increase compared to the initial budget). To meet spending needs the government’s external debt increased by GEL 4.3bn and domestic debt by GEL 649mn, with total public debt projected at 54.4% of GDP in 2020, and government plans to return the pre-crisis debt parameters in medium term. Notably, government borrows more from donors than it currently needs and creates a fiscal buffer in the amount of GEL 2.7bn in the revised budget document. These buffers build confidence as funds can be utilized if crisis deepens or recovery takes longer than is currently projected.
FDI stood at 4.4% of GDP in 1Q20
FDI was down 41.7% y/y amounting US$ 165mn (4.4% of GDP) in 1Q20, according to Geostat’s preliminary figures. The major reasons behind this decrease were completion of BP pipeline project and ownership transfer from non-residents to residents in some companies. Notably, reinvestments accounted for 81.6% of total FDI in 1Q20. The financial sector was the largest FDI recipient at US$ 94.9mn (+96.3% y/y, 57.4% of total), followed by real estate at US$ 34.0mn (20.6% of total), transport & communication at US$ 19.1mn (-51.4% y/y, 11.6% of total), hotels and restaurants at US$ 15.8mn (-76.3 y/y, 9.5% of total) and mining at US$ 10.4mn (+22.0% y/y, 6.3% of total). UK topped the list of investors with US$ 73.1mn (+18.8% y/y), followed by USA at US$ 28.1mn (+34.2% y/y), and Panama at US$ 19.6mn (-56.8% y/y).
NBG sold US$ 29.7mn
On 10 June 2020, the NBG intervened on the FX market and sold US$ 29.7mn out of offered US$ 40mn to limit GEL volatility. This was 6th FX intervention YTD for a total sale of US$ 189.7mn through FX auctions.
