2022 June-July

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.

Georgian central bank leaves monetary policy rate unchanged at 11%
The National Bank of Georgia announced that it was keeping the refinancing rate unchanged at 11% following a meeting of its Monetary Policy Committee on May 11.
The NBG explained that the Russian invasion of Ukraine had created “new risks” for the economy, leading to the decision based on “current and expected developments”. In particular, it noted, “the sanctions imposed on Russia due to its military actions, and supply-side disruptions, have significantly increased prices on a number of product categories on international markets”.
“As a result, inflation has increased significantly both in developed and developing economies. The global surge in prices has been transmitted to the Georgian market as well and, despite the slowdown compared to the beginning of the year, inflation in Georgia remains high at 12.8%,” the NBG said.

Economy Minister: Georgia close to introducing digital national currency in pilot mode
Georgia is approaching the stage where it will introduce a digital national currency in pilot mode, with a “full-scale change” to take several years, Economy Minister Levan Davitashvili announced in early May.
In a conference involving the National Bank of Georgia, the United States Agency for International Development’s Economic Security Program and the World Bank, Davitashvili noted that the digitization of the Georgian lari would be an “important stage” for the development of financial services in the country, pointing out that it would simplify, accelerate and cheapen payment systems.
“This will also simplify public services […] more technology companies will enter Georgia, and the country should be at the forefront of innovations with these changes,” Davitashvili said.

Turkey, China, Russia top trading partners of Georgia in January-April 2022
Turkey ($766.3 million), China ($614.7 million) and Russia ($559.7 million) were the top trading partners of Georgia in total external trade turnover in January-April 2022, data from the National Statistics Office of Georgia shows.
Georgia’s top trading partners by exports in January-April 2022 were China ($290.4 million), Azerbaijan ($168.4 million) and Russia ($156.4 million), while the top trading partners by imports were Turkey ($637.8 million), Russia ($403.3 million) and China ($324.3 million).
The top three export items were: copper ores and concentrates ($363.3 million, or 22.9% of total exports); ferro-alloys ($195.4 million, or 12.3% of total exports); and motor cars ($132 million, or 8.3% or total exports). The top three imports were: petroleum and petroleum oils ($337.1 million or 9.2% of total imports); motor cars ($319.7 million, or 8.7% of total imports); and copper ores and concentrates ($266 million, or 7.3% of total imports).
Overall, Georgian external trade turnover amounted to $5.25 billion in January-April 2022, posting a 33.4% increase year-on-year, said Geostat.

Enterprise Georgia launches new Export Assistance Program
Enterprise Georgia has launched a new Export Assistance Program to increase the export potential of small and medium-sized local businesses, the state organization announced at the start of April.
Designed to support the diversification of export markets, identify sectors and products with export potential, and incentivize international sales, the program will provide technical assistance to export companies.
Incorporating three technical assistance components, the new program also seeks to minimize export challenges and implement mechanisms stimulating export. Technical assistance components of the program will include product licensing and certification (up to c.10,500 USD); branding and product packaging (up to c. 6,800 USD); and international network entry (up to c. 10,500 USD).

AFD allocates €500,000 in support of sustainable railway development in Georgia
Georgian Railway has received a €500,000 grant from the French Development Agency (AFD) to promote sustainable development of railway transport in the country and align Georgia with the European Union standards and regulations in the field.
As part of the grant, a national rail policy document, freight market research, and development strategy in the regional context will be elaborated in cooperation between the two sides. An investment plan aiming at expanding the freight market in Georgia will also be prepared.
The Georgian company also announced the arrival of a French expert in Georgia to “properly implement” the set goals. During their visit, the professional will consult with representatives of Georgian Railway and various other official agencies. The project was launched in April and is expected to run for 12 – 18 months.
AFD has provided support to Georgia since 2012 totaling €250.7 million in financial commitments for projects for urban and rural development, infrastructure, governance, and renewable energy.

Georgian TV stations receive 79.8 million GEL in commercial advertising revenue in 2021
Commercial advertising revenues of the Georgian broadcasters increased by 30% in 2021 compared to the previous year, amounting to 79.8 million GEL ($25.8 million), the Communications Commission revealed in May.
The regulatory body responsible for broadcasting and electronic communication said commercial advertising revenues of TV stations had increased by 18.4 million GEL ($5.9 million) compared to last year’s 61.4million GEL ($19.8 million).
In 2021, total advertising revenues of radio broadcasters in Georgia increased by 0.4 million GEL and amounted to 7.2 million GEL ($2.3 million).

ADB: Georgian economy to slow to 3.5% growth in 2022 due to Ukraine war
Georgia’s economic growth is expected to slow to 3.5% in 2022 due to ongoing hostilities in Ukraine, after reaching ‘promising double-digit growth’ last year, a report released by the Asian Development Bank in April reads.
The ADB, which originally forecasted 6.5% growth in its previous publication, projected 5% growth in 2023 in view of the “increased internal and external demand, fueled by faster credit growth,” calling it a “slight recovery”.
Shane Rosenthal, the ADB Country Director for Georgia, said the country was going to see an effect from the Russian invasion of Ukraine through reduced tourism, exports, and remittances, adding that the Georgian government needed a “careful prioritization” of expenditures after two years of “expanded pandemic-related spending”.
The report further forecasted inflation in the country to slow to 7% in 2022 and to 4% in 2023, adding that the current account deficit was estimated to equal 10% of the gross domestic product in 2022, “with a forecasted rise in oil prices before narrowing to 7.5% in 2023.”
The ADB’s revised projections estimate a 12.1% increase in exports in 2022 and 14.9% in 2023, while remittances were forecasted to decrease to $1.8 billion in 2022 and $1.7 billion in 2023 due to the economic sanctions cutting growth in Russia.

Passenger traffic in Georgia up 565% in Q1 2022
Georgian airports have served 700,200 passengers in the first quarter of 2022, an increase of 565% compared to the same period of last year and a 69% recovery from 2019 figures, the Civil Aviation Agency announced in mid-April.
A total of 3,978 flights were held at Georgian airports in the reported period, with the number of regular flights equaling 2,996 and the figure for charter flights totaling 982. This marks a 207% increase compared to the number of flights in the corresponding period of 2021, and a 76.5% recovery compared to 2019, the CAAG revealed.
In the first three months of 2022, Tbilisi International Airport served 507,050 passengers (+407%), Kutaisi International Airport served 121,470 passengers (+37,047%), and Batumi International Airport served 68,474 passengers (+1,635%).

Annual inflation rate at 12.8% in April
The Consumer Price Index in Georgia grew by 1.8% in April 2022 MoM, while the annual inflation rate totaled 12.8%, the National Statistics Office of Georgia announced in the first week of May.
The agency also revealed prices had increased by 5% in annual core inflation figures, excluding food and non-alcoholic beverages, energy, regulated tariffs, and transport, while the annual core inflation without tobacco totaled 5.7%.
The annual inflation rate was mainly influenced by price changes in the following groups: food and non-alcoholic beverages (+21.3); transport (+22.4%); and housing, water, electricity, gas, and other fuels (+9.4%).

Over 500 infrastructure projects worth $31 million planned for Georgia’s Kakheti region
Eastern Georgia’s winemaking region of Kakheti will benefit from over 500 infrastructure projects worth ₾96 million (about $31m/€30m), the Ministry of Infrastructure revealed on May 11.
From solar-powered utilities to digital information initiatives co-funded by the European Union, as well as recreational spaces, irrigation systems, cultural venues and more, the region will receive both new initiatives and upgrades to its infrastructure.

Government writes off 2021 property taxes for tourism sector
On April 4, Prime Minister Irakli Garibashvili announced that the Georgian government has decided to write off property taxes from the country’s tourism sector businesses. The government head noted that the decision followed studies of challenges in the sector, adding that in the global pandemic, tourism had “suffered the most.” The tourism sector, including hotels and restaurants, will not be required to pay property taxes for 2021, Garibashvili said, adding that the details of this initiative will be revealed by the country’s economy and finance ministers.

Georgia, Denmark sign sustainable energy development deal
An agreement on a 2-million-euro program on developing sustainable energy in Georgia was signed in the beginning of April between Levan Davitashvili, the Georgian Economy Minister, and Jeppe Kofod, the Danish Foreign Minister. Entitled Creating a Favorable Environment for Sustainable Energy Development in Georgia, the deal will seek to contribute to energy efficiency and renewable energy, the Ministry of Economy announced. The ministry also revealed that the Danish authorities had pledged support for the development of the country’s energy efficiency via experience-sharing and the interest of Danish businesses in the Georgian market. Denmark will allocate the funds for the development of the sector in the country by 2023.

Government to offer construction companies 1.5 – 2 billion GEL in projects in 2022
The government will offer projects worth approximately 2 billion GEL ($647million) to the construction business in the country this year, Georgian Prime Minister Irakli Garibashvili announced at the start of April. The program, which was initiated by the prime minister in February, seeks to accelerate economic growth in the country and improve its public infrastructure by investing in new development.
“We offered the construction sector to attract additional financial resources to receive guaranteed orders for construction and rehabilitation of public infrastructure,” Garibashvili said.
The PM also pointed to examples, including 800 schools that are set to be renovated to “European standards” for the Ministry of Education, and said that the government aimed to begin implementing projects originally slated for 2025 this year. The projects range from the construction of half a million square meters of residential space for IDPs to the construction of a “Police City” as well as the building and rehabilitation of law enforcement offices and projects for rehabilitating and constructing schools and kindergartens.

Study shows significant price hikes in healthcare sector over last 5 years
Prices in the Georgian healthcare sector have “risen dramatically” over the last five years, with a 64% increase in prices for medication, a 35% increase for outpatient services, and a 31% increase for health insurance, a new study by the Institute for Development of Freedom of Information, a Georgian NGO, has revealed.
The report notes the price increase has been “partly caused” by the global pandemic, adding that the price of medications rose by an average of 14.6% in the first 11 months of 2021. The Georgian government spent over ₾600 million ($194 million) on the Covid-19 pandemic’s management, the report reads. Additionally, the report notes that the spread of Covid-19 “drastically reduced” hospital visits of patients for other diseases, amounting to a 42% reduction in 2020, with hospital revenues “sharply falling” by 7% to ₾1,078,000 ($348,885) in 2020.
The report also revealed that the real wages in Georgia’s healthcare sector have not increased in the last five years despite the growth of nominal wages by 4.7% from 2016-2021, which amounted to ₾1,108 ($358) in 2020, noting that the purchasing power of the existing wages has not changed due to high inflation.

Money transfers to Georgia up 58.8% in April
Remittances to Georgia from abroad equaled $308.1 million in April, marking a 58.8% increase compared to the same period of last year, according to data released by the National Bank of Georgia.
The largest remittance senders were from Russia ($132.98 million), Italy ($33.4 million), and the United States ($25.02 million), the NBG also announced.

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