2022 April-May News

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.

Georgia’s GDP growth rate reaches 10.4% in 2021
The nominal GDP of Georgia amounted to 60.23 billion GEL ($18.7 billion) in 2021, up by 22.3 percent year-on-year, while the real growth of GDP also increased by 10.4 percent, preliminary data from the National Statistics Office of Georgia (Geostat) shows.
The largest share of GDP growth was posted in the following sectors: wholesale and retail trade, repair of motor vehicles and motorcycles (16.6%); manufacturing (11.7%); real estate activities (10.2%); construction (8%); agriculture, forestry and fishing (7%); public administration and defense, compulsory social security (6.5%); transportation and storage (6.2%); financial and insurance activities (5.2%); and human health and social work activities (4.8%).
In January 2022, YoY real GDP growth increased 18%, with a reduction registered in construction and the information and communication sector, according to Geostat.

Georgia submits application for EU membership
Prime Minister Irakli Garibashvili praised the “historic day” for Georgia when signing of the country’s bid for European Union membership on March 3, saying the move “continues the efforts of our ancestors, which was aimed at unification in a common European family.”
The government head told the nation that applying for EU membership marked the next important stage of Georgia’s European integration path. The move follows similar initiatives by Ukraine and Moldova, who also submitted applications for membership in the wake of Russia’s invasion of Ukraine in late February.

Geostat: foreign direct investments doubled in Georgia in 2021
Foreign direct investments (FDI) in Georgia totaled $1.152 billion in 2021, twice as high as the adjusted data of 2020, the National Statistics Office of Georgia (Geostat) reported in its latest data.
Geostat said an increase in equity, reinvestment of earnings and debt instruments were the main reasons for the growth in FDI, with the share of reinvestment in 2021 amounting to 66 percent of total FDI.

World Bank allocates $400 million for Human Capital Program in Georgia
The World Bank will allocate $400 million for the Human Capital Program for Georgia, calling it “the largest cross-sectorial investment” for the country over 30 years of partnership.
The World Bank Board of Executive Directors approved the program in late March and announced that it will be financed through the bank’s Program for Results (PforR) in Georgia, which is aimed at improving education, health, and social protection outcomes.
Sebastian Molineus, the World Bank Regional Director for the South Caucasus, called the Human Capital Program for Georgia an “unprecedented” project for both Georgia and the World Bank, saying “only by unlocking the full potential of its human capital, by ensuring access to high-quality education for the next generation, and by delivering equal healthcare and social protection services for all citizens, can Georgia build a solid foundation for inclusive and sustained growth.”
Georgian Finance Minister Lasha Khutsishvili said human capital development was one of the “highest priorities” for the Georgian government, emphasizing the importance of protecting human capital outcomes, closing equity gaps, and alleviating negative effects of the pandemic in a more consistent manner.

Q4 2021: unemployment down 1.4% in Georgia
The unemployment rate in Georgia decreased by 1.4% in the fourth quarter of 2021 compared to the same period of the year prior, and amounted to 19 percent, Geostat reports.
In urban areas, the unemployment rate was reduced by 2.1% while in rural areas it decreased by 0.2%. The economic activity rate, or the percentage of the country’s population that is able and willing to work regardless of labor status, increased by 1.2% compared to the same period of the previous year, totaling 51.2% of the working-age population (aged 15 and older).

Industrial production of wind power plants to begin in Georgia following signing of memorandum
Additional production of wind power plants in Georgia is set to begin following the signing of a memorandum between the Ministry of Economy, the State Military Scientific Centre Delta, and the Georgian Wind Energy Association.
The state body, Delta, and the Association will make efforts to find potential investors interested in financing and developing production of components of wind power plants on the territory of Georgia, with the manufacturing of wind generators and their components set to be located on an industrial area owned by Delta.
Negotiations with the leading companies producing wind power generation equipment, as well as with parties interested in purchasing such equipment and its components, is also included in the memorandum.
In November 2021, a declaration was signed between the Georgian Economy Ministry and the German Development Bank (KfW) on the development of clean and renewable energy in Georgia. The deal intended to assess the potential and benefits of green hydrogen, solar energy, water and wind in the country. It also involved undertaking a pilot project providing benefits to the country’s economy and assisting the development of clean and renewable energy.
A 50-megawatt wind power plant near the village of Nigoza in eastern Georgia is planned to begin operations in 2022, the Ministry of Economy announced in May 2021.

Deputy Economy Minister: number of companies exporting to EU up 70% since Association Agreement
The number of Georgian companies exporting to the European Union in 2021 increased more than 70% compared to the figure before the 2014 signing of the Association Agreement (AA), Deputy Economy Minister Genadi Arveladze said on March 23.
During an address to the country legislative body, Arveladze said the increase had meant 962 companies were involved in exporting to the EU, adding the Deep and Comprehensive Free Trade Area (DCFTA) agreement – signed in 2014 as a part of the AA between Georgia and the EU – had made a “significant contribution” to the growth of foreign trade and exports in Georgia.
He further noted that exports of agricultural products to the EU had increased by 14 percent in 2021, including nuts and hazelnuts (+12%), mineral water (+20%), wine (+20%), sugar-containing carbonated waters (+97%), fruit juices (+6%), and canned fruits and vegetables (+11%).
Arveladze said the EU market has already been opened for Georgian fish and fish products, processed leather, wool and honey. He also highlighted the EU Commission Regulation of December 2021, based on which Georgia was added to the list of countries from which snails are allowed to be exported to the EU market.
In January-February 2022, Georgia exported locally produced goods worth $760.4 million, a 54.5% increase YoY, while in the whole of 2021 the figure totaled $4.2 billion, an increase of 26.9% compared to the previous year.

Former concert hall space in downtown Tbilisi sold in seventh auction attempt
A former concert hall located in the riverside Rike Park in Georgia’s capital Tbilisi has been sold via an online auction for 10 million and 2 thousand GEL (about $3,094,025), the National Agency of State Property announced.
The agency said the buildings – dubbed “Rike Jugs” due to their shape – had been purchased by the foreign company Global Victory Trust, adding that the new owner would be expected to use the space to arrange a museum of wine, digital art and technology, as well as exhibition and conference spaces in the area, within 36 months.
This was the seventh auction announced to sell the Rike Jugs since the twin buildings’ inclusion in the list of to-be-privatized facilities, as part of the 100 Investment Offers to Business state program.
Built in 2012 over the space of 15,000 square meters, the buildings were designed to host music performances but were never completed. The construction of the two spaces cost GEL 75 million ($23,255,497).
1.2 million Georgian citizens spent 226 million GEL on domestic tourism in 2021
About 1.2 million Georgian citizens aged 15 and above made 1.4 million monthly visits within the country in 2021, with total expenditures amounting to 226 million GEL ($70 million), the latest data published by Geostat shows.
In 2021, the monthly average number of domestic tourist visits by Georgian residents amounted to 662.6, which is an increase of 37.9% compared to the previous year. The majority of the visits were to Tbilisi (average 300,1 visits per month) and the western Imereti region (241,9 visits per month).

February 2022: money transfers to Georgia up 13.7%
Remittances to Georgia from abroad reached $183.4 million in February 2022, marking a 13.7% increase compared to the same month of last year, according to the National Bank of Georgia (NBG).
The largest remittance senders were in Italy ($32.96 million), Russia ($21.94 million) and the United States ($21.10 million). Analysts at Galt and Taggart have noted that they expect remittances from Russia to decrease significantly in the coming months following the outbreak of war and the wide scale of sanctions currently in place against the country.

Gambling ads banned from March 1
All gambling ads have been banned in Georgia since March 1, and citizens under the age of 25 will no longer be able to use gambling websites, Prime Minister Irakli Garibashvili has announced.
The head of the government called the issue one of the biggest problems for the Georgian society over the years, adding 1.5 billion GEL ($476 million) was spent in online casinos every year, mostly involving youth and minors. Speaking about the new restrictions, the PM said, “many people were involved in these vicious games”, adding even a reduction of the figure by a billion would “already be a great relief”.

Average salaries in Georgia up 11.3% in Q4 2021
Average monthly earnings in Georgia increased by 149.1 GEL ($46.5) in the fourth quarter of 2021, an 11.3% increase compared to the same period of the previous year, and amounted to 1,463.8 GEL ($456.5), data Geostat shows.
The highest monthly earnings were observed in the following fields: financial and insurance activities – 2,431.6 GEL (+20.5%); information and communication – 2,270.2 GEL (+3.2%); construction – 2,209.5 GEL (+7.2%); professional, scientific, and technical activities – 2,133.0 GEL (+5.5%).

Agriculture Ministry, UNFAO sign deal to improve productivity, competitiveness of Georgian farms
Improving productivity and competitiveness of agricultural farms in Georgia, and aiding micro, small, and medium-sized agriculture and food production enterprises is the subject of an agreement signed between Otar Shamugia, the Georgian Agriculture Minister, and Raimund Jehle, the Representative of the UNFAO.
Strengthening the country’s export opportunities and facilitating the implementation of information and consultation service strategy for farmers, is also part of the FAO Country Programming Framework, signed by the parties.
The Georgian Minister said the FAO would implement a $10 million “large-scale project” funded by the European Union under its European Neighborhood Program for Agriculture and Rural Development, adding the project would provide “additional assistance” to the country in food safety and introduction of standards to “increase the potential for Georgian products to be exported to EU member states.”

EU-Georgia Association Agreement consumer protection bill passes first parliament hearing
A consumer protection bill stipulated by the Association Agreement signed between the European Union and Georgia passed its first hearing in the Parliament of Georgia on March 1.
Warranties of consumer contracts, liability, warranty terms, repercussions of breaching service responsibilities and more are included in the bill, which additionally “establishes rules for prohibiting unfair commercial practices that violate the values of trust and good faith,” the country’s legislative body announced.
Maka Bochorishvili, the Chairwoman of the Georgian Parliament’s EU Integration Committee, noted the law would establish major principles of consumer protection. “The Association Agreement between Georgia and the European Union stipulates commitments, which include the regulation of consumer policy at the legislative level. The introduction of European standards for consumer protection is important for the country’s EU integration process,” Bochorishvili said.

Cost of construction up by 13.6% in Q4 2021
The Construction Cost Index in Georgia increased by 13.6% in the Q4 of 2021 compared to the same period of the previous year, according to Geostat.
The increase in construction cost was mainly influenced by price changes for the following groups: construction materials (+9.64%); wages (+2.01%); machinery (+0.67%); and transportation, fuel, and electricity (+0.26%).
A working group will be set up under the Economy Ministry to prepare recommendations and proposals for resolving the challenges in the construction sector, with the decision made earlier this week during the Georgian Economy Minister Levan Davitashvili’s meeting with the representatives of local construction companies.