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.
IMF projects Georgian economy to grow 10.5% in 2022
“The International Monetary Fund predicts Georgia’s economy will grow by 10.5% in 2022,” announced Economy Minister Levan Davitashvili on November 21, noting that the country exhibited “one of the highest” growth rates in the region. He added that adjusted data by the national statistics office showed the country’s economy had grown by 10.5% in 2021 and 10.2% between January and September of 2022.
Minister Davitashvili said increased activities in transportation, storage, construction, and the industry and service sectors, including tourism, had made a “significant contribution” to growth this year. “Foreign exchange inflows received from foreign trade, tourism, international shipping, and other channels were also an important factor in the growth of economic activity,” Davitashvili added, noting that forecasts for the next five years were “quite encouraging.”
Tbilisi in National Geographic ‘100 best cities to visit’ book
The National Geographic Travel magazine has published a new guidebook for the 100 best cities in the world to visit, with the index including the Georgian capital of Tbilisi, the Georgian National Tourism Administration announced on November 18.
Entitled 100 Cities, 5000 Ideas, the guidebook features information on the historical districts of Tbilisi; the history of its museums, theaters, cultural monuments; tourist routes; hotels; and food facilities. It also introduces readers to the ancient capital of Mtskheta, located about 20 kilometers north of Tbilisi.
Georgia, Canada negotiate foreign investment agreement
The fourth round of negotiations on a Foreign Investment Promotion and Protection Agreement was held between Georgia and Canada in the Canadian capital of Ottawa on November 19.
Georgian Deputy Economy Minister Genadi Arveladze said the signing of the agreement would encourage Canadian investors to increase their existing investments and explore investments in new sectors.
Minister Arveladze also noted it would stimulate entrepreneurial initiatives and the free movement of private capital, which in turn would contribute to the development of economic cooperation between the countries.
During his visit to Canada, Arveladze also met with Canadian Deputy Minister of International Trade Rob Stewart and discussed prospects for deepening cooperation between the countries in trade and investments, energy, mineral extraction and processing, and transport.
Gas distribution companies to invest $97 million to improve supply in Georgia
Natural gas distribution companies in Georgia will invest ₾265 million ($97.4 million) over the next five years to improve gas supplies in the country, the Georgian National Energy and Water Supply Regulatory Commission (GNERC) announced on November 18.
“The purpose of the investment plans is to improve the reliability of natural gas distribution networks and the quality of service, minimize emergency interruptions, and ensure a continuous and safe supply of gas,” GNERC said.
Tbilisi Energy will invest ₾35.5 million ($13 million) in upgrading the Tbilisi natural gas distribution network and improving the quality of its service. Socar Georgia Gas will invest ₾111.8 million ($41 million) in improving the supply outside of Tbilisi, while Sakorggazi will invest ₾113 million ($41.6 million).
Georgian external trade up 33.5% January-October
Georgia’s external trade turnover amounted to $15.22 billion from January to October 2022, posting a 33.5% YoY increase, the national statistics office revealed on November 14. The value of exports rose by 34% and equaled $4.54 billion, while imports grew by 33.2%, amounting to $10.68 billion. The trade deficit stood at $6.1 billion, a 4.6% increase compared to 2021.
Georgia’s top partners by exports from January to October 2022 were China ($607.5 million), Azerbaijan ($541.7 million), and Russia ($530.3 million), while the top markets by imports were Turkey ($1.91 billion), Russia ($1.41 billion) and China ($921 million).
Bakuriani set to host 2023 Ski World Championship
Secretary General of the International Ski and Snowboard Federation Michael Vion praised infrastructure works in the Georgian ski resort of Bakuriani ahead of its hosting of next year’s Freestyle Ski and Snowboard World Championships, Georgia’s Mountain Trails Agency (MTA) said on November 15.
The body governing ski resort areas quoted the official as saying the work was being “done in the best way” and adding the international federation was “waiting for February in order to see the full picture,” in reference to the coming tournament. “I’m sure together we will ensure that the event planned in Bakuriani is held in the greatest way,” Vion said.
MTA Head Irakli Burchuladze said two artificial reservoirs for a snowmaking system – which is currently being installed – had been built in the Didveli mountain area and the neighboring village of Mitarbi, while six new tracks had also been prepared for the competition.
American IT company Lineate to invest $700,000 in Georgia, create 50 jobs
American IT company Lineate will invest $700,000 in Georgia and create at least 50 new jobs after signing an agreement for a foreign direct investment grant with Enterprise Georgia, the state program promoting entrepreneurial activity in the country announced in early November.
The Georgian agency said Lineate was the first company to benefit from the program and will receive 15% cashback of its investment in the form of a grant after fulfilling investment requirements. Lineate opened a regional office in the country earlier this year and currently employs around 85 people.
Enterprise Georgia Director Mikheil Khidureli said the FDI grant program, which aims to support potential and existing investors in Georgia in initiating new or additional investments in sectors with high value added, has played “a significant role” in attracting American investment in Georgia.
The FDI grant state program can be used by international companies operating in advanced manufacturing such as production of electric, automobile, and aviation parts; business process outsourcing; IT; and logistics.
Construction of Kakheti highway to be completed by 2024
Travel time from the Georgian capital of Tbilisi to the central part of the country’s eastern Kakheti region will be reduced to one hour and 20 minutes thanks to a new highway that is due to be operational within the next two years, the Ministry of Infrastructure announced in late October.
The ministry said the construction of the four-lane Kakheti highway was “actively underway,” with the ₾527 million ($190 million) investment from the state budget aiming to “completely relieve traffic in populated areas.” The ministry said it expected improved traffic safety and reduced travel times to result from the completion of the project.
The Asian Development Bank is currently financing construction of the Bakurtsikhe-Tsnori road with ₾87.8 million ($31.6 million).
Kazakhstan to transport oil through Tbilisi-Baku-Ceyhan pipeline starting in 2023
Kazakh Prime Minister Alikhan Smailov announced at a briefing with journalists in November that Kazakhstan would begin transporting oil through the Tbilisi-Baku-Ceyhan pipeline starting January 1, 2023. Smailov said the oil would arrive from eastern Kazakhstan’s Aktau port into the Azerbaijani port of Baku and would then be transported through the Baku-Tbilisi-Ceyhan pipeline.
Smailov told reporters that an agreement to transport 1.5 million tons of oil through the Baku-Tbilisi-Ceyhan route has been reached and that later the volumes will be increased to between 6 and 6.5 million tons, adding that Kazakhstan’s oil producer Tengizchevroil Company had doubled the number of oil-tank cars and piloted rail shipments towards Batumi and Uzbekistan.
Central bank keeps refinancing rate at 11%
The National Bank of Georgia (NBG) has decided to keep the refinancing rate unchanged at 11% following a meeting of its monetary policy committee on October 26, noting that domestic inflationary pressure remains high (amounting to 11.5% in September) despite the fact that inflation has retreated from its peak.
The NBG said it expected inflation to gradually reduce following “positive trends observed in international commodity markets.”
“Commodity prices and international shipping costs are declining. The international food price index has been falling for six consecutive months. It is expected that in line with the appreciated exchange rate, these trends will gradually be transmitted to the local market, reducing inflation. However, given the current geopolitical circumstances, uncertainty remains high,” the NBG’s statement read.
The statement further added that it expects inflation to remain high until the end of the year but continue to gradually decline and approach its target level in the second half of 2023. “Taking into account the existing inflationary risks, a tight monetary policy will be maintained, and its normalization will gradually begin only after a clear trend of decreasing inflation is observed,” the central bank said. The next meeting of the monetary policy committee will be held on December 21.
Georgian businesses report $53.25 billion in turnover in 2021
The turnover received by the Georgian business sector increased 31.5% YoY and amounted to ₾150.4 billion (about $53.3 billion) in 2021, GeoStat announced in early October.
The trade sector (including repair of motor vehicles and motorcycles) had the highest share (36.4%) in the total turnover in the business sector, followed by: arts, entertainment, and recreation (32%); manufacturing (9.8%); construction (5.5%); transportation and storage (4.6%); electricity, gas, steam, and air conditioning supply (3.2%); and other sectors (8.5%).
Georgian businesses employed around 744,000 people in 2021, which is 5.7% higher than the year prior. The average monthly salary for a person employed in the business sector in 2021 was ₾1,347 (about $480). This was an increase of ₾124 ($44) YoY.
Tourism revenue hits $2.9 billion record high
Georgia received $2.9 billion from international tourism between January and October 2022, surpassing pre-pandemic numbers from 2019 and hitting record-high markers this year, the Georgian National Tourism Administration announced on November 17.
The administration said revenues from international tourism had increased by 183% YoY in the first 10 months. It also added the figures showed a 100% recovery from the same period in 2019. In October alone, revenue reached $337 million, a 126% recovery from the same month in 2019 and an increase of 137% YoY.
Government: medication prices to decrease 40% in 2023
The costs of medical drugs are expected to decrease 40% next year following the anticipated introduction of reference prices, the Georgian government administration announced in early November.
The initial stage of the introduction will cover medication for chronic diseases, before expanding to other categories, with the initiative aiming to “increase access to quality medicine,” ensure “fair prices,” and create a “competitive and transparent pharmaceutical market.”
Consequently, the government estimates that almost 100,000 Georgian citizens will save up to ₾200 million ($73.4 million). This follows the government’s decision in March to allow pharmaceuticals to be imported from Turkey, which it says has already created a 60-80% reduction of medication prices in Georgia.
Pension agency says net asset value of fund at $1.03 billion
The Pension Agency of Georgia estimated the net asset value of the country’s pension fund to be at ₾2.78 billion ($1.03 billion) in its latest report, with the update also showing the fund’s net return between 2019 and November 2022 at 38.8% ($145mln).
The real return of the fund (considering inflation) reached 1.4% in the same period, the agency said, adding it had begun buying USD-denominated assets, with 17.5% of its investment portfolio invested in dollars as of November 9 and the remaining 82.5% in GEL-denominated assets.
The investment portfolio is currently distributed as follows: 3.6% is placed in current interest accounts; 13.5% is in local treasury bonds; 8.7% is in U.S. treasury bonds; 7.9% is in global stocks; 0.9% is in Eurobonds; and 65.4% is in certificates of deposit and term deposits.
1.33 million people were registered in the pension system as of November 9. The system came into effect in Georgia in January 2019 and applies to Georgian citizens, foreign citizens living in Georgia with permanent residency in the country, and stateless persons who are employed or self-employed and receive an income. It also applies to employees of both the public and private sectors.
French Development Agency to co-finance Georgia’s human capital program with €100 million
Georgia will receive €100 million from the French Development Agency to co-finance a human capital development program as part of an agreement signed on November 15 between the AFD, the Ministry of Finance of Georgia, and the French Embassy.
The ministry said the program was already being financed with €358.5 million from the World Bank, with the new agreement providing additional funding.
Improving the efficiency and inclusivity of the human capital supply system in Georgia is the goal of the program, which aims to: improve linkages between digital systems in all directions for the supply of human capital in the sectors of education, healthcare, and social security; increase the effectiveness of expenditures made for the development of human capital in these sectors; and increase the inclusiveness of human capital for the improved quality of expenditures made in the three fields.
The state body said Georgian Finance Minister Lasha Khutsishvili had met Cyrille Bellier, Department Head for the Balkans, Middle East and Asia at AFD to discuss cooperation between Georgia and the agency before signing the agreement.