Georgia: Trade deficit stabilizes, but remains large

CAUCASUS / CENTRAL ASIA - In Brief 13 Jul 2023 by Ivan Tchakarov

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Trade deficit remained large over Jan-Jun, pointing to a deterioration of the current account deficit in 2023 against the backdrop of moderating remittances from Russia. Trade data as of Jun shows that the goods deficit remains large, running at US$8.7bn on a 12-month basis (Graph 1). The sizable deterioration of the trade balance over the last two years has been mainly driven by fast economic growth spilling over into much higher imports. As a result, the trade deficit has increased by 85 percent since 2020. At the same time, the current account deficit halved in 2022 to 4.7 percent of GDP as higher tourist receipts and monetary transfers from Russia more than offset the gaping trade deficit.  Graph 1 Trade deficit in goods has stabilized, but remains large Source: Statistical Office of Georgia, Author's calculations Indeed, net monetary transfers have declined relative to 2022, although they remain robust against longer-term averages. Net transfers peaked at US$500mn in Dec’2022 but have now slowed down to US$354mn in May’2023 (Graph 2). The decline has been led by lower remittances from Russia, which dropped by about 50 percent relative to last May. GrapH 2 Remittances have declined, but are still running at levels higher than historical averages Source: Statistical Office of Georgia, Author's calculations