TBC Capital published Update From The Chief Economist. According to the document, December estimates for net inflows improved further primarily driven by higher tourism revenues, while the net export of goods remained flat and the migration seems to be somewhat declining again.
As for the remittances, when excluding Russia, the growth is solid. If trade of goods negative balance slightly widened in nominal value, it remained at the same level as in November when estimated as percent of total trade turnover. Still, both exports and imports experienced a notable decrease in annual terms, driven by lower motor car imports and a significant drop in commodity trade due to reduced prices. In this regard, recovered exports of ferro-alloys in December to the highest level since January 2023 was noteworthy.
"Besides inflows, in January, unlike previously, we observe some positive shift in sentiments measured as higher growth of GEL deposits compared with the FC likely attributed to the shift in seasonal depreciation expectations as the GEL has in fact strengthened. The combination of both inflows and sentiments being positive for the national currency provides a ground for further appreciation.
However, while we do not yet have a data on the NBG December and January FX interventions, based on the inflation and the GEL REER dynamics, what, together with the net inflows, we call TBC Capital 3 Pillar approach, we say there is a considerable probability the central bank, after selling some part of the reserves, is now again on the FX buying side. Therefore, we still do not bet on further material strengthening", - TBC Capital reported.
