2023 October-November 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.

Government raises GDP growth forecast to 6.5%, increases 2024 budget by $190 million
Georgian Prime Minister Irakli Garibashvili on September 15 said the government had raised its growth forecast for 2023 from 5% to 6.5%, and was accordingly increasing the annual state budget by ₾500 million ($190 million). The PM added that government debt had gone down from 60% of GDP two years ago to around 38%, while reserves had reached “an all-time high” of over $5.5 billion. This announcement comes after Georgia reported 7.2% GDP growth in the first seven months of 2023.

Money transfers to Georgia down 14.1% YoY in August
Georgia received $287 million from abroad in August 2023, which is 14.1% less than in August 2022, the National Bank of Georgia announced in mid-September. The largest sender of remittances to Georgia by volume was Russia, with $60.3 million – a decrease of 46% YoY. Italy, with the second largest source of money transfers at $45 million, was up 23% YoY. This follows a 0.8% annual decrease in money transfers in July, with Russia ($73.82 million), Italy ($45.34 million) and the United States ($40.03 million) coming in as the largest remittance senders.

Central bank reduces interest rate to 10%
The Monetary Policy Committee of the National Bank of Georgia (NBG) reduced the key refinancing rate by 0.25 points to 10% on September 13, citing a downward trajectory of inflation as the reason for the reduction. It noted in its decision that “prices of raw food commodities on international markets have decreased, and international shipping costs have approached almost pre-pandemic levels. These, alongside with the appreciation of GEL, have reduced imported goods prices in Georgia,” adding that “tight monetary policy and low inflation expectations are also contributing significantly to the decline in inflation.”
The central bank added that inflation was expected to remain below the target level of 3% for the remainder of 2023 before stabilizing around that point for the medium term. It also cautioned that “despite these positive trends, inflation risks remain high” with the current regional geopolitical situation “increasing the uncertainty of commodities markets” and noted that “inflationary pressures, along with external risks, and domestic economic trends” remain “noteworthy.” For these reasons, the NBG signaled that it intends to continue a gradual loosening of monetary policy at a “cautious pace,” with its next meeting scheduled for October 25, 2023.

Unemployment down 1.4% in Q2
The unemployment rate in Georgia was down 1.4% YoY in the second quarter of 2023 and equaled 16.7%, data released by Geostat in mid-August shows. The statistics office says the number of hired employees had increased by 5.6% and numbered 916,700 while the number of self-employed persons had increased by 2.2% to 410,200.
Unemployment during Q2 decreased by 5.2%, or 266,900, Geostat noted. The share of the labor force in the total population aged 15 and older increased by 1.6 % YoY to 53.2%, while the employment rate increased by 2.1 % and amounted to 44.3%
Georgian Economy Minister Levan Davitashvili further highlighted the “historical high” of 737,000 people employed in the domestic business sector at a government meeting on September 4. The minister also noted that the average monthly salary of employees had increased in the second quarter of 2023 by nearly 18%, amounting to ₾1,914 ($726).

Georgia, Peru sign visa-free travel agreement
Georgian Foreign Minister Ilia Darchiashvili and his Peruvian counterpart Ana Cecilia Gervasi Diaz on September 19 signed an agreement for visa-free travel between the two countries on the sidelines of the United Nations General Assembly in New York. The Georgian Ministry of Foreign Affairs said the officials discussed current issues of the “bilateral and multilateral agenda” and future prospects, emphasizing the importance of conducting “high-level visits” and deepening cooperation in politics, trade, economy, culture, and education.

Georgian government touts new energy projects, record “generation and exports”
Deputy Economy Minister of Georgia Romeo Mikautadze on September 11 said that 2023 was witnessing “record figures” in generation and exports of electricity in an address to employees of the sector near Zahesi Hydro Power Plant. He also noted that 64 HPPs had been built in Georgia since 2012 with a total installed capacity of 1,209 MW and an investment value of $1.896 billion. Mikautadze said that the ministry had signed 102 contracts since 2022 for the construction of 68 HPPs, 11 wind farms, and 23 solar power plants, adding that 13 plants had been built in the country since last year and seven more were expected to be completed by the end of this year.

Government approves 2023-2030 National Transport and Logistics Strategy, Action Plan
The Government of Georgia approved the 2023-2030 National Transport and Logistics Strategy and its 2023-2024 Action Plan, aiming to position the country as a regional logistics and transport hub, the government administration announced on August 14. The body said the document aimed to strengthen the country’s logistics sector and ensure “effective” functioning of road, railway, and marine transport as well as civil aviation while increasing the competitiveness of international transport routes and further developing domestic passenger transportation. An interdepartmental commission for the development of the transport and logistics sector was also created as part of the government decree and will coordinate the implementation of the measures determined by the strategy and the corresponding action plan.

Enterprise Georgia to finance renewable energy production
Enterprise Georgia will finance projects aiming to produce electricity using renewable energy sources, the body announced on September 7. The agency, which promotes entrepreneurial activity in Georgia, said it would support projects for small hydropower plants using solar, wind, or hydro energy under .5-megawatt capacity with loans or lease.
Director Mikheil Khidureli said production and development of renewable energy was “one of the priorities” of the country and added that the initiative would benefit the growth of the sector and the state’s energy future. The support comes as part of a program aiming to foster entrepreneurship, encourage start-ups and the growth of new businesses, support expansion and retooling of existing ones, and boost the competitiveness of the private sector by facilitating easier access to capital. Enterprise Georgia currently uses the platform to subsidize loan interest for the full term of loans, providing financing for the industrial sector, hotels, balneological resorts, tourist services, agritourism business, and the ecotourism industry.

China signals interest in Georgian infrastructure projects
Chinese Ambassador to Georgia Zhou Qian on September 6 spoke about the importance of the Middle Corridor, a transportation route network connecting China with Europe through the South Caucasus region, and noted that Chinese companies are “interested in all infrastructure projects” in the country and ready to become involved. Speaking to the media on the sidelines of a conference in Tbilisi for the 10th anniversary of the One Belt, One Road Initiative by the Chinese government, the diplomat stressed the diversification of logistic opportunities between China and Europe was “significant” for the implementation of the initiative, which aims to create greater trade and infrastructure links between Asia, Europe, Africa and beyond by reviving and expanding the historical routes of the Silk Road.
He noted that Chinese companies had interests in the construction of a deep-sea port in Anaklia and that the recently signed strategic partnership agreement between the governments of Georgia and China was expected to further increase the inflow of Chinese investments in Georgia and upgrade diplomatic ties to a “new level.” These comments come after Georgian Prime Minister Irakli Garibashvili’s July visit to China, where he highlighted “China’s important role as a stable trade partner for Georgia.” The Georgian PM also announced a new visa-free travel regime for Chinese citizens on September 11, citing the need for “increased tourism inflows” and “the attraction of economic investment.”

Government to subsidize grape harvest with $19 million
About ₾50 million ($19 million) has been allocated to subsidize the 2023 grape harvest across Georgia, Agriculture Minister Otar Shamugia announced in mid-August. This aid, he noted, will “financially support farmers” and ensure that “not a single kilogram of grapes is left behind.” Shamugia said the subsidy would set the price of one kilogram of the Rkatsiteli and Kakhuri Mtsvane varieties at 20 tetri. All enterprises that receive and process more than 100 tons of grapes will receive a subsidy of 20 tetri if they pay at least 90 tetri for 1 kilogram of grapes. “As for the grapes that cannot be processed by the private sector, of course, our state enterprise will take them and process them,” Shamugia said.
Shamugia also noted that a reduced harvest was expected this year due to climate change affecting the quantity and quality of grapes.

EBRD, EU, and Sweden boost female entrepreneurship in Georgia
The European Bank for Reconstruction and Development (EBRD) has granted a $20 million loan to TBC Bank, one of Georgia’s largest banks, for women-led enterprises outside of Tbilisi, the financial institution announced on September 19. The loan is part of its Women in Business program, supported by the EU and Sweden. “Building an inclusive and sustainable economy remains one of the EBRD’s priorities, and women entrepreneurs are an important driver of economic growth in Georgia. With today’s signing, we look forward to seeing more female leaders bringing their business ideas to life,” said EBRD Managing Director for Financial Institutions Francis Malige. The EBRD is a leading institutional investor in Georgia, with over €5 billion invested across 287 projects in the country to date.

$32 million to be spent on upgrades at Kutaisi Airport
Georgian Economy Minister Levan Davitashvili announced on September 4 that the government would spend ₾85 million ($32 million) on upgrading the infrastructure at Kutaisi International Airport in the country’s west. Davitashvili said the Airport “needs to not only be perfect for passenger transportation but also to fully realize its potential,” noting that the existing runway has “numerous issues.”
“The renovated airport will mean that we will have the opportunity to receive all types of aircraft, both passenger and cargo,” he said, adding that the project to construct a new 3.5-kilometer runway was already underway and should take 18 months to complete.
Kutaisi Airport saw record-high passenger flows in the first seven months of 2023, recording a 90% increase compared to 2019. The number of flights from the airport in July also increased by 94% compared to the same month in 2019.

August bank statistics show $17 billion loaned, deposited
Commercial banks in Georgia loaned ₾48 billion ($17.9 billion) and received deposits of ₾48 billion in August, the latest data from the National Bank of Georgia (NBG) shows. The volume of loans increased by 0.5% compared to the previous month, while the number of deposits increased by 0.6% month-on-month. In August, the volume of term deposits increased by 5.1% while on-demand deposits decreased by 2.2%, the NBG also said. Loans taken out in the national currency amounted to ₾7.7 billion ($2.86 billion), while loans in foreign currencies amounted to ₾13.4 billion ($4.97 billion).

Government to “gradually” sign contracts with winning companies of first renewable energy project auction
The Georgian government will “gradually” begin signing contracts with companies declared winners in the first auction in projects for renewable energy infrastructure in July, the Economy Ministry announced on September 16.
The ministry said that the auction results confirmed that the new scheme was successfully being implemented and is expected to generate over $2 billion in investments for Georgia’s energy sector. The state body said that within the scope of the new scheme, a total of 78 applications had been submitted, adding that investors showed “high interest” in the call. A total of 27 companies were announced as winners, and their projects foresee the construction of 10 solar power plants, two wind farms, and 15 hydropower plants.