TOPIC OF THE WEEK: CA positions improve in the CCA in 2Q24, allowing for useful FX reserve buildup
The publication of current account data for the CCA economies for 2Q24 allows us to assess the overall external performance in the region in the second quarter of the year. The 2Q24 data for our CCA economies, which was published this week, has shown an improving external position (for all countries except Georgia), with the CA deficit ex-Azerbaijan coming in at 1.8 percent of GDP vs 3.1 percent of GDP in 1Q (4-q ma basis). Including the only energy exporter in our sample, Azerbaijan, yields a small surplus of 0.1 percent of GDP (vs. a deficit of 0.6 percent of GDP in 1Q).
In the case of Uzbekistan and Tajikistan, the better external performance was driven predominantly by higher-than-anticipated remittances, while in Armenia by smaller gaps in the goods and primary income balances. In addition, while in Armenia and Uzbekistan the CA deficits fell, Tajikistan switched from a CA deficit in 1Q24 to a surplus in 2Q24. Moreover, the traditional CA surplus in Azerbaijan remained intact, although it moderated somewhat over the quarter. It was only Georgia that experienced a sizable worsening of its CA deficit, chiefly due to its sizzling pace of economic growth.
The broader improvement of external positions has benefited reserve accumulation. FX reserves have been built up in the first half of the year, with Uzbekistan leading the pack, followed by Tajikistan, Azerbaijan and Armenia. Georgia is again the only country that has lost reserves, reflecting the worsening CA deficit.
We forecast that the CCA CA ex-Azerbaijan will worsen slightly, from 2.5 percent of GDP in 2023 to 2.9 percent of GDP in 2024. Thus, the broader theme of the normalization of CA positions to their "normal" deficit states, following the one-off bumper CA-surplus year of 2022, is still valid.
Now read on...
Register to sample a report