Investment News

Investor.ge provides a brief update on investments and changes in government policy that could impact the business environment. Information in this issue was taken from agenda.ge and other sources.

World Bank, IMF call Georgia ‘regional leader in economic recovery’
Georgia is leading the South Caucasus region with a projected rebound of 8% growth in GDP this year, says the latest edition of the World Bank’s Economic Update for the region, released in October. “The country’s recovery is expected to edge down to 5.5% in 2022 and 5% in 2023, as macroeconomic support continues to be removed,” says the report.
The South Caucasus countries, and Georgia in particular, are seeing a robust recovery from the shocks of 2020, supported by pick-up in domestic demand and recovery among external partners. However, amid rising inflation and slowly recovering labor market outcomes, increasing the pace of vaccination remains a critical priority”, said World Bank Regional Director for the South Caucasus Sebastian Molineus. Forecasting similar growth figures, the IMF’s latest report entitled World Economic Outlook: Recovery During a Pandemic estimates that Georgia’s economy will grow 7.7% in 2021 and 5.8% in 2022, giving it one of the highest economic growth rates in the Middle East and Central Asia. Commenting on the report, Economy Minister Natia Turnava said “We will have the highest economic growth rate of 5.8%, almost 6% per year. This will allow us to overcome the negative effects of the pandemic very quickly, to overcome poverty and to make our economy more diversified and stronger.”
As for Georgia’s neighboring countries from the same region, the IMF forecasts that the Armenian economy will grow 6.5% in 2021 and 4.5% in 2022, and the Azerbaijani economy is expected to grow 3% in 2021 and 2.3% in 2022. The Turkish economy is projected to grow 9% in 2021 and 3.3% in 2022, while the Russian economy will grow 4.7% in 2021 and 2.9% in 2022.

Georgian government introduces Covid-19 green status and lifts further restrictions
Despite the fact that the country’s COVID-19 case numbers have remained high throughout the autumn months, the government has decided to lift additional restrictions and restrict access based on a new “green status.” Starting on December 1, restaurants, cafes and bars can operate without hourly restrictions and the permissible number of spectators at cinemas, theatres and the opera house will increase from 30% to 50% occupancy. Also mandated from the beginning of December is the use of a “COVID-19 green pass” to enter a number of establishments, including food facilities, cinemas, theatres, opera houses, museums, concert halls, entertainment centers, casinos, spas, gyms, hotels, and mountain resorts. Green status is available for any individual who is fully vaccinated, can prove they have recovered from COVID-19, or have undergone a PCR (in the last 72 hours) or rapid antigen test (in the last 24 hours).

2022 state budget submitted to parliament
The 2022 state budget of Georgia has been planned with a 6% economic growth forecast, announced the Ministry of Finance of Georgia in October. The ministry says that tax revenue will be 23.5% of the gross domestic product (GDP) and the budget deficit will be 4.3% of GDP next year. The initial draft of the 2022 budget shows increased expenditures for pensions, social assistance to target groups of the population, infrastructure, and schools with 500 million GEL allocated for coronavirus healthcare costs. It also recommends the following parameters: consolidated tax revenues of 15.9 billion GEL, total expenditures of 14.2 billion GEL, a debt to GDP limit of 52.7% (compared to 60% this year), and a state budget allocation of 18.44 billion GEL. Georgian Finance Minister Lasha Khutsishvili presented the proposed budget at the beginning of October; it is expected to be discussed in parliament and finalized in December.

Georgia hosts nearly 1.4 million international travelers in the first ten months of 2021 as flights resume from Kutaisi Airport
Nearly 1.4 million international travelers visited Georgia from January to October 2021, which is 1.8% less than in the same period of 2020, and 79% less than the same period of 2019.
In October, 205,680 international travelers visited Georgia, a 313% YoY increase and 69% decrease compared to October of 2019 levels. The National Bank of Georgia reports that Georgia received $886 million in earnings from the tourism sector in January-October of 2021, which is 73.5% more than the same period in 2020.
Travelers are also finding it easier to make their way to Georgia with the gradual resumption of international flights. The United Airports of Georgia reports that in October 2021 passenger traffic at Kutaisi International Airport was restored by 48% compared to the same period of 2019.
65% of flights were resumed at Kutaisi International Airport in October 2021, and November saw the resumption of Hungarian low-cost airline WizzAir direct flights from Kutaisi to Barcelona, Vienna and Berlin with a new direct route to Abu Dhabi scheduled to begin on December 15.

ADB allocates 101 million EUR loan for upgrading infrastructure and boosting regional development in Georgia
The Asian Development Bank has approved a €101 million loan to build and upgrade infrastructure and enhance services in urban centers to boost regional development and economic opportunities in Georgia. The project aims to support the country’s recovery from the pandemic and ‘make its cities more livable, inclusive, and climate-resilient.’ “It will upgrade city centers, public spaces, parks, and public transport to improve mobility. The project will construct libraries, e-learning centers, kindergartens, sports complexes, and other community buildings,” the ADB reports. It also aims to improve accessibility for older people, people with disabilities, women, and children via the ADB-developed Inclusive Cities Guidelines.
The ADB reports that the “Livable Cities Investment Project for Balanced Development” will benefit more than 1.5 million people both in Tbilisi and nationwide. ADB Director General for Central and West Asia Yevgeniy Zhukov noted that Georgia has made ‘significant economic gains over the past few years,’ noting however that ‘growth has been unevenly distributed and severely affected by the COVID-19 pandemic.’ Georgia has received a total of $3.92 billion worth of loans from ADB and undertaken technical assistance projects worth $28.9 million since 2007.

National Bank of Georgia: annual inflation will be higher than expected
The head of the National Bank of Georgia (NBG), Koba Gvenetadze, says annual inflation will be higher than earlier expected. The annual inflation rate stood at 12.8% in October 2021, breaking a 10-year record high, Geostat reports. The NBG originally projected a reduction in annual inflation to 6% in March, but Gvenetadze says rising international prices are affecting inflation. “Oil, for instance, is twice as expensive as it was a year ago and food prices have increased quite a bit,” notes the NBG head. The annual inflation rate was mainly influenced by price changes in the following groups: food and non-alcoholic beverages (+18.4%); transport (+19.6%); housing, water, electricity, gas and other fuels (+11.9%); and health (+8.4%).

Georgian external trade up 22.3% in Q1-Q3 2021
Georgia’s external trade turnover amounted to $10 billion in January-September 2021, which is 22.3% higher compared to the same period of the last year, shows preliminary data from Geostat. The value of exports increased 24% and totaled $2.98 billion, while imports also increased 21.6%, amounting to $7.02 billion. The trade deficit of Georgia in January-September 2021 amounted to $4.04 billion which is 40.4% of total trade turnover.
Turkey ($1.48 billion), Russia ($1.14 billion), and China ($1.07 billion) registered as Georgia’s top trading partners during the same period.
The top three export items were copper ore and concentrates (19.2 % of total exports), motor cars (11.3% of total exports), and ferro-alloys (10.6% of total exports). The top imports were motor cars (9% of total imports), petroleum and petroleum oils (8.2% of total imports), and copper ores and concentrates (7.5% of total imports).

Government announces plans to impose restrictions for online gambling and increase fees
Georgian Prime Minister Irakli Garibashvili announced in late November that the government has plans to increase fees for online gambling businesses (which are mostly foreign owned) as well as a ban on ads and a minimum age threshold of 25 years for gamblers. The Prime Minister noted that about 1.5 billion GEL flows out of the country annually due to online casinos. “This is the money of the country’s poor population. 99% of the individuals who are engaged with online gambling are socially vulnerable,” Garibashvili said.
Garibashvili also offered the possibility that online gambling may be completely banned in Georgia in the future.
Finance Minister Lasha Khutsishvili says that increased fees for online casinos amid new restrictions which will decrease the number of users, will ensure lower impact on their contribution to the state budget. Khutsishvili also said that the complete ban on online gambling is not expected “this or next year.”
Tourism and business development projects to be undertaken in seven Georgian municipalities
Urban renewal, tourism and business development projects will be undertaken in a total of seven Georgian municipalities in 2021-22, for which the EU will disburse about 4 million GEL (approximately $1.2 million), the Georgian government administration reports.
The EU will fund projects under the “Pilot Integrated Regional Development Program” in the municipalities of Lagodekhi, Telavi, Kutaisi, Kharagauli, Lanchkhuti, Tskaltubo and Chiatura. The overall budget of the program amounts to 200 million GEL.
Additionally, the Georgian government will co-finance the municipalities with more than 42,000 GEL (approximately $13,000).
Overall, 48 million GEL ($15.36 million) has already been allocated for municipalities of the four regions under the program.

Wine exports up 12% in the first 9 months of 2021
Georgia exported 72.5 million bottles of wine to 60 countries in January-September 2021, which is an increase of 12% compared to the same period of 2020, says the Georgian National Wine Agency. Export revenues for Georgia amounted to $168 million, an 11% YoY increase. The top five countries that imported Georgian wine in the first three quarters of 2021 were Russia (+7%), Ukraine (+8%), Poland (+24%), China (+16%), and Kazakhstan (+32%).
Georgian wine exports also increased in new strategic markets, including the UK (+178%), Lithuania (+36%), the United States (+18%), and Latvia (+2%).
In total, 397 companies exported wine abroad in the reporting period.
Meanwhile, Georgia exported 25.5 million bottles of Georgian brandy (+17%) and 660,000 bottles of chacha (+97%) abroad in the first eight months of 2021.
In total, Georgia has sold $270 million worth of alcoholic beverages (+15%) in the reporting period, including wine, brandy, chacha and others.

Q3 2021: unemployment up 2.5% in Georgia
The unemployment rate in Georgia has increased by 2.5% in the third quarter of 2021 compared to the same period of last year, amounting to 19.5%, Geostat reports.
In urban areas, the unemployment rate grew by 1.9%, while in rural areas it increased by 3.5%.
The economic activity rate, or the percentage of the country’s population that is able and willing to work regardless of labor status, has increased by 2.5% compared to the same period of the previous year, and totals 52.8% of the working-age population (aged 15 or older).

Global Corruption Index 2021 ranks Georgia “less corrupt” than some EU and NATO states
Swiss risk management company Global Risk Profile has released the Global Corruption Index 2021 with Georgia ranking 41st among 196 countries, improving from its position in 50th place the previous year. On the index, which measures corruption risk levels in the countries, Georgia received a score of 33.26 on a 0-100 scale, while the risk of corruption in the country was evaluated as ‘low’. Georgia ranked above the EU and/or NATO member states of Slovakia, Croatia, Bulgaria, Hungary, Romania, North Macedonia, Montenegro, Albania, and Turkey.
The head of the Administration of the Government of Georgia, Ilia Darchiashvili, said that Georgia ranking ahead of the EU and NATO member states on the list is an ‘important impetus’ to continue implementing anti-corruption reforms in the country. “For one’s part, that [continual implementation of anti-corruption reforms] will assist Georgia on its way to Euro-Atlantic integration,” Darchiashvili added. The index, composed of two sub-indexes related to corruption and white-collar crimes, relies on 43 variables based on datasets borrowed from internationally recognized entities, such as the UN, World Bank, and Transparency International.

New €47 million 7-year project launched to support Georgia’s forest reform
The Green Climate Fund is launching a new €47 million project to support the implementation of Georgia’s forest sector reform in 2021-2027, announced the Ministry of Economy of Georgia in October. The project will cover the Georgian regions of Guria, Mtskheta-Mtianeti and Kakheti with its eight municipalities of Akhmeta, Telavi, Dedoplistskaro, Kvareli, Tianeti, Lanchkhuti, Ozurgeti and Chokhatauri. As part of the project, the Georgian Ministries of Economy and Agriculture and the German development agency GIZ signed the technical cooperation agreement today. “We are launching a project … [that] will help to establish sustainable forest management in the country, to introduce energy efficient and climate-friendly technologies and improve forest management. The project will contribute to the well-being of the local population, strengthen and improve the control of forests and forest resources,” said Georgian Agriculture Minister Levan Davitashvili said.

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