2023 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.

FDIs in Georgia hit record of $2 billion in 2022
Foreign direct investments in the country exceeded $2 billion in 2022, setting a “historic high,” Economy Minister Levan Davitashvili announced in a statement on March 13, noting that the European Union was the primary source of funds. “FDIs from the European Union increased by 142.5% and amounted to $859.6 million,” the minister said, adding that 43% of total FDI had come from the bloc’s states in 2022.
Figures released by Geostat also showed the United Kingdom as a major FDI source in 2022 at a value of $428 million, followed by Spain with $367 million and the United States with $164 million.
Overall, FDI increased in 2022 by 61% compared to 2021, with increases in equity and reinvestment of earnings cited by Geostat as the “main reason” for growth. The largest share of FDIs was registered in the financial and insurance sectors ($526 million) followed by real estate ($407 million).

Georgian Railway hits “record-high” profits in 2022
Georgian Railway hit a “record-high” profit of ₾283 million ($106 million) in 2022, with its freight marking a 22% YoY increase, Director General Davit Peradze told Prime Minister Irakli Garibashvili in mid-February at a meeting to discuss the company’s agenda for 2023.
At the meeting, Peradze told government officials that the company was currently capable of carrying 27 million tons of freight per year, adding that the figure would reach 48 million after the completion of its modernization project by the end of 2024. He also noted that “large-scale” works were being carried out to update the company’s fleet of carriages and improve infrastructure.
The official also discussed the Baku-Tbilisi-Kars railway project, which facilitates the transport of passengers and goods between Azerbaijan, Georgia, and Turkey, outlining that the route is expected to become “fully operational” next year, with 87% of the project completed at this stage. Plans for 2023 also include reforming the railway transport sector of Georgia in a bid to make it “more competitive” and bring it in compliance with European standards, Georgian Railway representatives noted at the meeting.

Government announces $500 million kindergarten rehabilitation program
The Municipal Development Fund of Georgia’s Ministry of Infrastructure will announce a tender for the reconstruction and renovation of hundreds of kindergartens across Georgia this spring, the fund announced in late February during a meeting with construction companies.
Within a larger ₾1.3 billion ($500 million) government program, the tender will involve the construction of 135 new kindergartens and renovation of 100 facilities. Fund Director Davit Tabidze said ₾100 million ($38 million) of the budget had already been allocated for this first phase of the works, which are scheduled to commence later this year.
The overall program aims to build 300 new kindergartens and renovate 585 existing facilities across the country. The works will include setting up indoor and outdoor spaces for use as recreation zones, with the buildings to be fully adapted to children with special needs.

External trade up 12% in January & February
Georgia’s external trade turnover amounted to $2.89 billion in January and February 2023, posting a 12% YoY increase, the Georgian National Statistics Office revealed on March 13.
The value of exports rose by 20% and equaled $915 million, while imports also grew by 9%, amounting to $1.98 billion in the reporting period. The trade deficit reached $1.06 billion, and the share of trade turnover hit 37%.

EU to give €21 million in budget support to back “key reforms” in Georgia
The European Union will give €21 million in budget support to back the implementation of “key reforms” in various sectors of the Georgian economy, from economic and business development to rural advances and food safety, the EU Delegation to Georgia announced in February. Supporting development of the labor market and contributing to regional development and agriculture are also under the scope of the package.
The aid was approved last year in the form of budget support, which is only disbursed when agreed conditions for results are met, the EU Delegation explained. After assessing implementation of reforms in sectors of the Georgian economy, the EU decided to issue disbursement packages for: economic and business development (€5.67 million); skills development and matching for labor market needs (€7 million);the EU 4 Integrated Territorial Development program (€5 million); and the European Neighborhood Program for Rural Development and Agriculture (€3.2 million).

Georgia’s aviation sector gets accolades, new destinations
Tbilisi International Airport and Batumi International Airport in the country’s Black Sea Adjara region were selected among the best 10 airline facilities in Eastern Europe in the Skytrax World Airport Awards in Amsterdam on March 16. Tbilisi Airport was selected in the category for the 10th time in a row, while the Batumi facility was selected for the second time, TAV Georgia, the company operating the two venues, said in a statement.
In addition to gaining recognition, Tbilisi International Airport announced in early March that several airlines will be adding flights and new destinations. Turkish-German airline SunExpress will start operating flights between Tbilisi and Antalya on May 28, while flights from Izmir and Turkey’s capital city of Ankara will start on June 2 and June 5, respectively. Aegean Airlines, Greece’s largest airline company, will launch new direct flights between Thessaloniki and Tbilisi. Flights will carry passengers twice a week, on Tuesdays and Fridays, between May 22-October 5. And Air Moldova, which entered the Georgian airline market in 2022, announced that it will increase the frequency of its flights to Chișinău and add a new connection between the Moldovan capital and the western Georgian city of Batumi. Flights between Chișinău and Tbilisi will be operated daily between March 26 and the end of October.
In the west of Georgia, Kutaisi International Airport announced that it served 75,733 passengers in February, marking a 63% increase compared to the same month of last year. Five airline companies currently operate flights to 28 destinations in 17 countries from the airport, with Hungarian airline Wizz Air slated to station its third jet at the facility and add five new European destinations this year. Kazakh airline FlyArystan will also begin operating regular flights from Kutaisi Airport to Shymkent starting in July.

Annual inflation to decrease to 5% in April – TBC Chief Economist
Annual inflation will decrease to 6% in March, and could go as low as 5% in April, TBC Chief Economist Otar Nadaraia told media outlet BMG on March 17. According to Nadaraia, the economy is ready for a gradual easing of the monetary policy. “In our assessment, the decision to cut the monetary policy rate has already matured with the argument that the rate and other measures unfortunately cannot replace past inflation. The main thing is the forecast for the next twelve months, and in this regard, the inflation forecast is quite promising,” said Nadaraia. The annual inflation rate stood at 8.1% in February 2023.

Georgia becomes chair of World Wine Trade Group
Georgia will lead international wine industry experts in discussions relating to global wine trade issues over the next 12 months as part of the country’s newly assumed status as the Chair of the World Wine Trade Group (WWTG), the National Wine Agency (NWA) announced on March 16. The country’s representation was officially awarded the position at the annual WWTG meeting in Brussels in early March, with its status set to commence on May 1.
The state body for promotion of Georgian wine called the result “another recognition of Georgia as a wine producer country,” with NWA Chairman Levan Mekhuzla noting that the position will “contribute to the promotion of Georgian wine and the growth of exports, including among the member countries of this WWTG.”
The WWTG is an informal grouping of government and industry representatives from wine producer countries including Argentina, Australia, Canada, Chile, Georgia, New Zealand, the United States, South Africa, and Uruguay. Georgia last chaired the WWTG in 2014.

Money transfers to Georgia up 103% YoY
Georgian recipients received ₾986 million ($372 million) in remittances from abroad in February, marking a 103% increase YoY, data from the National Bank of Georgia shows. Russia ($187 million), Italy ($39 million), and the United States ($30 million) were the countries with the highest levels of money transfers. In the same month, $27.6 million was transferred from Georgia to recipients abroad – a 3.2% increase compared to the February 2022 figure of $26.7 million.

EBRD allocates €19 million for waste management in Adjara
The European Bank for Reconstruction and Development (EBRD) has allocated €19 million for better waste management and disposal in western Georgia’s Black Sea region of Adjara, the IFI announced in early March.
The first committed tranche of up to €3 million will be used to purchase new solid waste management equipment, while up to €16 million will be used to build a new waste treatment plant in the second phase, allowing the Adjara Solid Waste Management Company to recover recyclables and divert waste to a new sanitary landfill.
The IFI also revealed the investment would address the priority needs of Batumi, as identified by its Green City Action Plan, as well as the wider Adjara region. “This includes stopping the disposal of waste at existing dumpsites in Kobuleti and Batumi. These dumpsites are active sources of land, water, and air pollution, impacting the ecosystem of the region and the Black Sea in general,” the EBRD statement read.
Georgian Finance Minister Lasha Khutsishvili said the project would help transform Batumi into a “more attractive” tourist destination for local and foreign visitors. This initiative is the latest of more than 280 projects undertaken by the EBRD in Georgia that have amounted to over €35 billion in investments.

Average salary up 21% in Q4 2022
The average monthly nominal earnings in Georgia increased by 21.2% in the fourth quarter of 2022 compared to the same period of the previous year and reached ₾1,773 ($688), the National Statistics Office of Georgia announced on March 17.
The highest monthly earnings were observed in the following sectors: information and communication: ₾3,672 ($1,423); financial and insurance activities: ₾2,726 ($1,056); construction: ₾2,535 ($983); and professional, scientific, and technical activities: ₾2,455 ($952).
Deputy Economy Minister Vakhtang Tsintsadze said the increases in nominal monthly earnings and employment indicators reflected economic growth trends in the country. “The fact that the real salary increases, excluding the effect of inflation, is about 10% is particularly noteworthy, indicating that the disposable income of the population and their purchasing power are increasing,” said Tsintsadze.
Tbilisi and Mtskheta-Mtianeti were the leading regions for average earnings, the figures also showed.

Georgian wine gives strong showing at Vinexpo New York
At the international exhibition of wine and alcoholic beverages Vinexpo New York in the United States, 26 Georgian wine companies showcased their products with the financial and organizational support of the National Wine Agency (NWA), the agency announced on March 11.
Within the scope of the exhibition, representatives of the NWA discussed the strategy for the promotion of Georgian wine with Georgian wine importers and representatives of local distribution companies. “In recent years, the measures implemented with the support of the Georgian government have helped to increase awareness of Georgian wine in the U.S., which has been reflected in concrete results,” the agency noted.
The “steady growth” of Georgian wine exports to the U.S. market, which reached its “historical high” in 2022 with one million liters of wine exported from the country, was also highlighted by the state body. According to the agency, by participating in Vinexpo New York, the Georgian companies have had the opportunity to get acquainted with new trends and challenges in the world wine market and to explore new markets in the U.S.

Georgian startup ecosystem needs growth, adaptation – ADB
The Georgian technology startup is seeing an ecosystem emerge in the country; however, it needs “growth, refinement, and adaptation,” noted a new report by the Asian Development Bank released in early March.
The report by the IFI, entitled Georgia’s Emerging Ecosystem for Technology Startups, offers an overview of the emerging sector in the country. Financial technology and e-commerce startups in Georgia overshadow development of “high-impact” startups in education, healthcare, agriculture, and environmental protection, it said, adding the latter were developing at a slower pace but were “especially important” for their contribution to human capital development, agricultural productivity, and climate change mitigation.
The ADB acknowledged the importance of government programs that provide grants for early- stage startups; however, it also emphasized that venture capital and non-financial support in Georgia are still in their “infancy.”
“Research and development of new technologies must be strengthened so that startups can commercialize new ideas,” Paul Vandenberg, ADB Principal Economist and the report’s co-author said, noting that local startups need to conduct market research to better understand and anticipate what products or services are in demand.