TBC Capital published an update From The Chief Economist. According to the report, July inflows continue to demonstrate strong performance. Furthermore, after retreating a month ago, the real exports slightly but still recovered and exports to Russia and Ukraine this month showed positive dynamics on the back of alcoholic spirits, motor cars and fruits. Also, for the first time since the pandemic, tourism inflows, including the migration impact, have exceeded the 2019 level, though the latter being below potential due to the introduction of the Russian flight ban.
However, when compared with the January 2020 pre-pandemic level at the seasonally adjusted terms, July USD denominated inflows stood at still high 115.9%. The remittances have moderated, however, only relatively and solely on the back of a lower increase from Russia, - the report notes.
Despite also strong imports, noticeably, July estimated net balance of trade in goods, tourism and remittances turned positive even in seasonally adjusted terms.
"We expect net inflows to remain strong, especially in the seasonally adjusted terms and therefore, perceive last week’s NBG 20 million USD intervention on the USD selling side one to calm the market sentiments, rather than the trend reversal. Furthermore, the GEL PPI based REER, based on the newly released data, indicates to a more moderate appreciation than earlier. However, on the contrary, July PPI print, often being a leading indicator for the CPI inflation, with a substantial decline once again indicates that the inflationary pressures likely have already peaked", - the repert notes.
As of the document, Last week, 2022 Q2 labor market data was also released with the significant YoY improvement, but the jobs market still being recovering to reach the 2019 levels. Though the calculations do not consider the migration impact.
