Trade deficit down 3.0% y/y (-9.5% y/y excluding one-offs) in 8M15
In August 2015, exports decreased 23.3% y/y to US$ 190.0mn, imports fell 8.8% y/y to US$ 622.5mn, and the trade deficit narrowed 0.5% y/y to US$ 432.6mn, according to foreign trade data released by GeoStat. The major drag on exports came from re-exports decreasing 53.2% y/y, while Georgia originated exports fell just 9.5% y/y. Exports to the EU increased 10.3% y/y, while exports to the CIS markets shrank 46.6% y/y. In August 2015, a pickup in capital and intermediate goods imports limited the drop in gross imports, while consumption goods imports continued the downward trend, with savings from lower oil prices and car imports being the major contributors.
In 8M15, exports fell 23.8% y/y to US$ 1.5bn, imports decreased 10.2% y/y to US$ 4.9bn, and the trade deficit contracted 3.0% y/y to US$ 3.5bn (-9.5% y/y excluding one-offs). 28% of exports were directed to the EU (+1.3% y/y), 38% to the CIS (-44.6% y/y), and 34% to other countries (-2.5% y/y), out of which Turkey (9.1% of total) and USA (5.6% of total) were the largest export destinations. A 65.6% drop in car exports (8.6% of total) had the largest negative impact. Nuts (+33.0% y/y), pharmaceuticals (+42.1%), crude oil (+218.3% y/y), and gold (+70.4% y/y) were the major Georgian exports increasing significantly in 8M15.
In 8M15, petroleum (-27.5% y/y), pharmaceuticals (+112.7% y/y), cars (-31.4% y/y), gases (+22.1% y/y), and copper ores (+6.7% y/y) represented the top 5 imported commodities. 32% of imports came from the EU (+2.3% y/y), 25% from the CIS (-5.6% y/y), and 43% from other countries (-19.7% y/y), with Turkey (17.3% of total) and China (8.1%) being the largest trading partners.
NPLs remain under control
In August 2015, the loan portfolio grew 14.9% y/y, excluding the exchange rate effect (+37.8% y/y and +2.2% m/m in unadjusted terms), to GEL 15.3bn (US$ 6.5bn). Deposits grew 6.5% y/y, excluding the exchange rate effect (+29.1% y/y and +4.4% m/m in unadjusted terms), reaching GEL 13.4bn (US$ 5.7bn). NPLs remain under control at 3.3% in August, +0.1ppts m/m and – 0.2ppts y/y.
NBG increases its policy rate by 100bps to 7.0%
At its meeting on September 23, 2015, NBG’s monetary policy committee increased the policy rate by 100bps to 7.0%. The decision to raise the policy rate was guided by increased inflation expectations related to lari depreciation. The annual growth in consumer prices came in at 5.4% in August. NBG cited that price pressures remain on the supply side – increase in intermediate costs due to weaker lari and higher prices on certain imported goods, intensified by the one-off increase in the electricity tariff. However, the rise in inflation has been limited by the weak aggregate demand and lower world prices of oil and food products. NBG also cited that the impact of the existing external shock on the US$/GEL exchange rate has been exhausted and no further pressure is anticipated. NBG expects inflation to move to the target level by the end of 2016 and being committed to price stability, it reassured the application of all relevant policy instruments to prevent the negative expectations affecting the growing inflationary process recently. According to NBG, the changes in monetary policy will depend on the dynamics of expected inflation, tendencies in economic growth, and global and regional economic environment. Next monetary committee meeting will take place on 4 November 2015.
Result of the FX auction
On September 22, 2015, NBG offered US$ 40mn on the FX auction, but demand was limited to US$ 27mn, and lari quickly gained 1.7% against the dollar in a day.
International cooperation continues
Georgia and Germany completed talks on intergovernmental cooperation in the field of financial and technical cooperation and signed a protocol on September 24, 2015 in Tbilisi. Germany continues to support investment projects in energy, infrastructure, and agricultural sectors in Georgia. Priority areas of cooperation are also vocational education, small and medium business development, metrology, environmental protection, and the strengthening of local self-government.
