Trade deficit down 25.9% y/y in January 2016
In January 2016, the trade deficit shrank 25.9% y/y to US$ 283.3mn as exports decreased 21.9% y/y to US$ 122.2mn while imports fell 24.8% y/y to US$ 405.5mn, according to GeoStat. 32% of exports were directed to the EU (-37.8% y/y), 24% to the CIS (-46.5% y/y), and 44% to other countries (+37.2% y/y, on the back of increased exports to China and Switzerland). Significantly reduced car re-exports (-45.6% y/y) and nut exports (-47.9% y/y) weighed on export growth. Copper ores (+42.2% y/y), fertilizers (+191.5% y/y), crude oil (+25.2% y/y), and gold (+28.4% y/y) were the major export commodities posting increases.
Gases (+3.2% y/y), petroleum (-19.7% y/y), cars (-33.4% y/y), copper ores (+54.5% y/y), and pharmaceuticals (-34.5% y/y) represented top 5 imported commodities in January 2016.
Money transfers down 11.8% y/y in January 2016
In January 2016, money transfers decreased 11.8% y/y to US$ 66.5mn, according to NBG. Significantly reduced remittances from Russia (-23.4% y/y, 29.8% of total) and Greece (-35.4% y/y, 11.8% of total) were the major contributors to the drop in total money transfers. Meanwhile, remittances posted growth from USA (+15.1% y/y, 11.3% of total), Israel (+64.5% y/y, 4.8% of total), Germany (+9.1% y/y, 3.1% of total), and Spain (+5.5% y/y, 2.9% of total).
Producer price index up 0.2% m/m and 4.1% y/y in January 2016
PPI for industrial goods increased 0.2% m/m in January 2016, according to GeoStat. A 3.7% rise in supply of electricity, gas, and water prices contributed the most to the overall index change. Prices were down for manufacturing of basic and fabricated metals (-6.0% m/m) and up for chemical products (+11.6% m/m). Prices were also down for mining and quarrying (-4.6% m/m).
Annual PPI increased 4.1% y/y in January 2016, with supply of electricity, gas, and water prices increasing 19.0% y/y and contributing 2.51ppts to the overall index change. Also, manufacturing prices increased 2.1% y/y, contributing 1.73ppts to the overall index change (in this category, prices were up for the manufacture of food, beverages, and tobacco and chemical products; down for basic and fabricated metals).
Government’s 4 pillar reform plan to boost growth
Giorgi Kvirikashvili, the country’s Prime Minister since December 29, 2015, put forth 4 pillars of reform initiatives to speed up economic growth in the face of a challenging external environment. The proposed measures, extensively communicated with and supported by private sector participants, include:
Tax code amendments aimed at further liberalizing tax and customs procedures – The deal includes Introduction of the Estonian model, which envisages the application of corporate income tax only to distributed profit; reinvested profit will be exempt. During the tax inspection period, the tax authority will be required to obtain the relevant court judgment in order to seize bank accounts. Only the tax authority will be authorized to conduct tax inspections. VAT will not be applied to the import of fixed assets.
Governance reform – Legal persons will receive government services based on a single window principle, similarly to how ordinary citizens currently receive services at public service halls.
Speeding up infrastructure projects implementation – The management of infrastructural projects will be modernized to accelerate implementation. Projects that have a particular impact on Georgia’s economic development are slated for completion within 3-4 years.
Education system reform – The reform intends to create professional and higher education systems that are in line with the demands of the labor market in Georgia.
