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: Georgia’s economy grew 10% in 2022, expected to grow 4% in 2023
Economic growth in Georgia in 2022 is projected to have hit 10%, with “much stronger” domestic economic activity observed compared to expectations in the aftermath of Russia’s invasion of Ukraine, according to the January issue of the World Bank’s Global Economic Prospects report. Recovery in domestic demand coupled with the rebound of tourism post Covid-19 and a surge in money transfers from Russia have been named as the primary reasons for Georgia’s strong performance in 2022.
Growth, however, is expected to slow to 4% in 2023 and stabilize around 5% in 2024, according to the report. The expected slowdown will “largely reflect a base effect from strong growth in 2022 as well as a slowdown in economic partners such as the European Union, and diminishing money inflows,” the report noted. On the upside, it added that “money inflows could last longer than initially expected and Georgia could benefit from some trade diversion as transport corridors are reconfigured.”
The World Bank also said that its latest figures indicated that Russia’s economy contracted by 3.5% in 2022, with estimates that it would shrink a further 3.3% in 2023. Elsewhere in the region, Armenia’s economy was estimated at 10.8% growth in 2022 and projected to have 4.1% growth in 2023; while Azerbaijan was expected to post 4.2% growth in 2022 and 2.8 % growth for the coming year. Turkey’s economy was estimated at 4.7% growth in 2022 and expected to post 2.7% growth in 2023.
EBRD approves €50.6 million loan to upgrade Tbilisi metro stations
The European Bank for Reconstruction and Development has allocated a sovereign loan of €50.6 million, including an investment grant of about €5 million, from its Green Climate Fund to finance the renovation of 12 metro stations in Tbilisi, the IFI announced on January 17.
Georgian Finance Minister Lasha Khutsishvili said while signing the Tbilisi Metro Modernisation Loan Agreement with the EBRD the government hoped “that the project’s completion will encourage more people to use public transportation by enhancing the metro system’s accessibility, dependability, and safety.” Vice President for Policy and Partnerships at the EBRD Mark Bowman noted at the signing that Tbilisi has made “significant progress” in transforming its urban transport infrastructure to meet “growing environmental challenges” over the recent years.
Tbilisi was one of the first cities to join the EBRD’s flagship Green Cities program, which supports members in addressing their environmental challenges through sustainable investments and policy measures.
Government takes full ownership of Georgian Railway
The government of Georgia has become the 100% shareholder of Georgian Railway, marking a change in the major company operating rail services across the country. A London Stock Exchange statement sent to investors on December 23 announced the change in the ownership of the company.
Previously, Georgian Railway was wholly owned by the state-owned Partnership Fund. The ownership change comes as part of a wider four-year strategy for reforming state-owned enterprises with the aim of establishing “appropriate corporate governance,” which was announced in December.
Georgian Railway reported a profit of ₾507 million ($188.86mln) in the first nine months of 2022, an 11% YoY increase. Only one large asset, the Georgian Oil and Gas Corporation, remains under the ownership of the Partnership Fund.
Galt and Taggart forecasts 5.2% inflation for 2023
Galt & Taggart forecasted 5.2% average annual inflation in Georgia for 2023 in its Weekly Market Watch report on January 9. The firm noted in the report that the figure was expected to decrease to 3% by the end of the year. “Along with decelerating inflation, we expect the monetary policy rate to be cut to 9% by end of 2023, down from the current level of 11%,” Galt & Taggart predicted.
In the latest economic statistics released by Geostat last week, the consumer price index decreased by 0.3% in December compared to the previous month, while the annual inflation rate came in at 9.8%. Geostat said the annual inflation figure included price increases for food and non-alcoholic beverages (+16.8%); housing, water, electricity, gas, and other types of fuel (+15.8%); alcoholic beverages and tobacco (+9.3%); and transport (+5.5%).
Tbilisi hosts South Caucasus’ largest tech conference
Touch Summit, the largest technology conference in the South Caucasus region, took place under the roof of Rustaveli Theater in Tbilisi on December 7 and 8. Speakers representing companies from across the world, including Google, Revolut, Nike, Tesla, Siemens, Porsche, and Bolt, took to the stage to share their experiences and participate in panel discussions during the two-day event.
The gathering included discussions on artificial intelligence, the Metaverse, digital archives, human machine interface, digital typography, sustainability, design, and more. At the conference’s Startup Exhibition and Pitching event, Georgian startup CALEN AI won a €5,000 prize and the award for best startup.
The Summit was hosted by Touch, a digital platform launched in recent years to connect digital professionals, startups, businesses, and investors, in partnership with Tbilisi City Hall, Georgia’s Education Ministry, the Georgian Innovation and Technology Agency, and Bank of Georgia.
New ski, balneological resorts announced by government
New locations in Georgia’s eastern, western, and southwestern regions will be turned into resorts for winter sports, medical therapy, and other purposes as the government looks to privatize around 50 currently unused areas next year, Minister of Economy Levan Davitashvili announced on December 30.
Interpressnews cited the Minister of Economy as confirming Zekari in the Kakheti region in the east, Chutkharo Pass in the western Kvemo Racha region, the village of Samshvilde in southeastern Kvemo Kartli, and Uraveli in southern Samtskhe-Javakheti among the new areas designated as resorts. Davitashvili noted that Chutkharo had potential to become a “leading ski resort in the country,” while Uraveli could be restored as a balneological resort, and Samshvilde could realize its “historical significance”.
He also noted the development of roads and other infrastructure would be “crucial” to ensure tourism in the new locations and “create an appropriate environment to attract investors.” He further revealed that the government plans to privatize 50 designated resort areas starting in March 2023, noting that it had studied the potential of over 100 currently unused and former resorts across the country.
Leading chemical company enters Georgia
Indorama Corporation, a leading Asian chemical company based in Singapore, has bought the Rustavi Azot plant, one of the largest suppliers of mineral fertilizers and industrial chemicals in the South Caucasus region. The Georgian Economy Ministry announced the deal on January 13, noting that Enterprise Georgia played a major role in securing the deal.
Enterprise Georgia Head Mikheil Khidureli commented on the development, lauding the entrance of the “largest Singaporean corporation” into the Georgian market as a testament to the investment potential of the country. “Indorama plans to ensure serious funds for the modernisation, development, and expansion of the plant’s production,” Khidureli said.
Indorama currently owns 160 plants in 38 countries and employs more than 45,000 people. The products manufactured by the corporation include nitrogen and phosphate fertilizers, polyethylene, polypropylene, polyester, textiles, cotton fiber, and medical gloves.
Flights recover to 88% of pre-pandemic level in 2022
Passenger traffic for airlines operating in Georgia recovered in 2022 by 85% compared to pandemic levels, while the number of flights were restored to 88% of their pre-Covid figures, the Georgian Civil Aviation Agency announced in January.
The governing agency revealed the country’s three international airports served 4.4 million passengers in 2022, marking a 78% increase compared to 2021. Hungarian budget airline Wizz Air (13%) was the leader in the Georgian airline market based on the number of passengers transported in 2022, followed by Turkish Airlines (12%), Pegasus (9%), Belavia (6%), Flydubai (5%) and Azerbaijan Airlines (5%). A total of 41 airlines operated in Georgian airports in 2022, with flights operated to 60 destinations.
National bank introduces new consumer protection requirements for financial organizations
New transparency requirements will come into play for financial organizations operating in Georgia starting on April 1 in a bid to better protect the rights of consumers, the National Bank of Georgia (NBG) announced on January 13.
The regulations will enable consumers to compare the financial products of financial organizations and help them make informed decisions. Ensuring transparency of prices of financial products and encouraging competition in the market are two of the principal motivations behind the change, the NBG said.
The new requirements will apply to commercial banks, branches of foreign banks operating in the country, as well as microfinance organizations and other depository institutions, such as credit unions and lending entities. The NBG cooperated with World Bank experts in its work on the new requirements, the institution added.
Locally produced exports up 18% in 2022
Georgia exported goods worth $5.59 billion in 2022, which is a 32% YoY increase, preliminary data from Geostat shows. Geostat says local exports in the country accounted for 66.2% of the total exports, amounting to $3.7 billion, which is 18.4% higher compared to 2021.
In 2022, Georgia’s top trading partners were China ($694.8 million), Russia ($536.1 million), and Bulgaria ($419.9 million). The five largest domestic export goods of Georgia were copper ores and concentrates (27.7% of total exports); ferro-alloys (12.2%), nitrogenous fertilizers (7.6%); wine (6.8%); and natural or artificial mineral and aerated waters (3%).
Georgia’s imports also grew by 33%, amounting to $13.5 billion, and external trade turnover amounted to $19 billion in 2022, posting a 33% YoY increase.
World Bank ranks Georgia first for public finance management system
Georgia has been ranked first among 59 countries for its “continuous improvements” in the Public Expenditure and Financial Accountability Assessment, an index compiled by the World Bank. The 2022 PEFA Assessment said the public financial management systems in the country were strong and had continued to improve since the previous assessment in 2018.
In its assessment, the World Bank noted that the Covid-19 pandemic had a negative impact on the aggregate expenditure of the Georgian budget, but that there had been an “array of improvements” in the development, execution, management, and oversight of public finances.
The World Bank’s Regional Director for the South Caucasus Sebastian Molineus commented on both assessments by saying the result was “undoubtedly a very impressive achievement” for Georgia.
“This year, we witnessed something new, as we adapted gender aspects to this tool and evaluated the public finance management system in Georgia in this context as well.
As we analyze progress in this area, it is clear that a little more work needs to be done, and we are pleased to continue our strong partnership with the Ministry of Finance to improve cooperation in this area,” Molineus added.
Georgia signs Black Sea green energy cable agreement
Officials from Georgia, Azerbaijan, Romania, and Hungary met in Bucharest on December 17 to sign the Agreement on the Black Sea Submarine Electricity Cable project. The project will allow the export of green energy to Europe via Georgia, connecting the country and the entire South Caucasus to Romania.
Georgian President Salome Zourabichvili welcomed the signing of the agreement, calling it “a major historical step” that would link the Caucasus region to the European Union, turning the Black Sea into a “European sea” and a “bridge” connecting both sides.
The Black Sea strategic submarine electricity cable between Georgia and the European Union will be a “window of new opportunities,” which will turn the country into an electricity hub and improve the internal energy market, European Commission President Ursula von der Leyen said at the signing ceremony. She lauded the Black Sea electric cable as a new transmission route “full of opportunities,” which has the potential to link Georgia to the EU electricity market and bring electricity to the Western Balkans, Moldova, and Ukraine.
PM: $1.22bln allocated for infrastructure projects in 2023
Georgian Prime Minister Irakli Garibashvili highlighted the ₾3.3 billion ($1.22 billion) budget for 2023 projects under the country’s Ministry of Regional Development and Infrastructure in his December presentation of the government’s 2022 work.
The prime minister said over 5,500 infrastructure projects had been implemented in the country in 2022, employing 25,000 people and involving about 1,200 companies. He also highlighted the “historic project” of the east-west highway as an important step in connecting the country, announcing that it would be “fully completed” in 2024, with over half of the works currently finalized. The Kakheti Highway project in the country’s east will also be completed in 2024, he said.
In addition to planned renovations of 885 kindergartens and 800 public schools across the country in 2023, Garibashvili also announced that a nationwide land registration system was being carried out in 59 municipalities of the country, with the work set to be fully completed by late 2024.
He spoke about work on water supply systems and pledged “all cities” would have access to a 24-hour supply by the end of 2025. He said projects worth up to ₾3 billion ($1.11billion) were underway in more than 200 locations, while 38 areas had seen supply networks completed in 2022, improving service to 140,000 people.