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.

Georgia opens border to travelers from 5 countries, business travelers
Travelers from Germany, France, Latvia, Lithuania and Estonia have been cleared to enter Georgia without having to present PCR tests or go through a two-week quarantine. These five countries have also opened their borders to Georgia. Before entering Georgia, travelers will have to fill out an electronic form indicating their travel history for the preceding 14 days and place of stay in Georgia. Business travelers will be required to take a PCR test every three days for the coronavirus or go through mandatory 14-day quarantine at their own expense. Meanwhile, Lufthansa has announced it will resume flights between Munich and Tbilisi in August, while negotiations continue with airBaltic, Air France and other international airlines.

Jan – May 2020: Georgian domestic exports down 16.2%
Georgia exported locally produced goods worth $1.23 billion in January-May 2020, which is 16.2 percent lower year-on-year, Geostat reports. The share of domestic exports (export of locally produced goods and services, including those of foreign origin that have been substantially changed through local processing) in total exports constituted 72.3%. For the reporting period, the share of the top 10 trading partners by domestic exports in the total domestic exports of Georgia amounted to 80.1%. The top partners were: China ($162.9 million), Russia ($141.9 million), Bulgaria ($136.6 million).

Q1 of 2020: Georgian economy grows 2.2%
Nominal gross domestic product (GDP) amounted to 11.06 billion GEL in the first quarter of 2020 in Georgia, while GDP grew by 2.2% year-over-year, Geostat reports. Real growth was registered in healthcare and social work (13.5%), arts, entertainment and recreation (16.2%), manufacturing (5.7%), construction (6.7%) and education (7.5%), while a decrease was observed in: finance and insurance (-6.1%), electricity, gas, steam and air conditioning (-6.6%), professional and technical activities (-13.1%).

May 2020: remittances to Georgia down 9.6%
Georgia received $131.8 million from abroad in May 2020, which is 9.6% less than the amount in May 2019, reports the National Bank of Georgia. The vast majority (92.8%) of all money transfers from abroad came from 14 countries, with the volume of transfers from these countries each exceeding $1 million last month. The share of these 14 countries constituted 89.9% of the total volume of money transfers. Italy, Russia and Greece were the largest remittance senders to Georgia in April 2020. Georgia received $27.59 million from Italy, $19.77 million from Russia and $18.82 million from Greece. In May 2020, remittances leaving Georgia totalled $13.6 million, which is a 33.7% decrease year-over-year.

Foreign debt up 6.1 bln GEL, domestic debt up 1.8 bln GEL
Per the government’s anti-crisis budget presented in June, the government of Georgia has taken loans worth 4.47 billion GEL to handle the crisis caused by the coronavirus pandemic. Emergency funding was brought in from the following organisations: Asian Development Bank – 1.45 billion GEL, KFW – 805 million GEL
International Monetary Fund – 603 million GEL, Asian Infrastructure Investment Bank – 450 million GEL, French Development Bank – 439 million GEL, World Bank – 396 million GEL, the EU – 241 million GEL. Overall, in 2020 the government of Georgia will increase foreign debt by 6.1 billion GEL, and domestic debt by 1.8 billion GEL. Also, the budget deficit will increase from 2.5% to 8.5%.

FDIs down 41.7% in Q1 2020
Foreign direct investments (FDI) in Georgia amounted to $165.4 million in Q1 of 2020, which is a 41.7% decrease compared to the same period in 2019, show Geostat data. The main reasons which caused the decrease in FDIs included the recent completion of a pipeline project and the transition of ownership in some companies from non-resident to resident units, Geostat said.
In particular, FDIs by major economic sectors were distributed in:
the financial sector – $94.9 million, the real estate sector – $34 million, and hotels and restaurants – $15.8 million. The share of FDIs by these three economic sectors accounted for 87.5% in Q1 of 2020.

Georgia at less than 1,000 coronavirus cases overall in mid-July
Georgia recorded less than 1,000 coronavirus infection cases by mid-July, with 846 recovered, and 15 fatalities. At the time of reporting, 4,851 people were under quarantine, and 231 were under hospital supervision. 31 citizens from abroad were brought home for medical treatment.

Enterprise Georgia shortlisted for World Trade Promotion Organization Awards 2020
Enterprise Georgia is one of 18 national trade promotion organizations to have been selected by the International Trade Centre (ITC) to take part in the 2020 World Trade Promotion Organization (WTPO) Awards. The competition is open to all national trade promotion organisations and recognises excellence in trade support services.
Enterprise Georgia will compete in the category of ‘best use of information technology’, and will go up against similar organizations from Brazil, China, Malaysia, Portugal and the United Arab Emirates. The winners will be announced on October 14 at the 13th WTPO Conference in Accra, Ghana.

Imports down 16.5% in Jan – Jun 2020
Imports into Georgia between January-June 2020 totaled $3.56 billion – 16.5% less than the same time period last year. Exports were also down sharply, totaling $1.5 billion (-15.6%). The negative trade balance for the reporting period was $2 billion, and accounted for 40% for foreign trade turnover.

Pensions increase to 250 GEL for individuals above 70
Starting July 1, the pensions of Georgian citizens above 70 years of age increased by 30 GEL ($9.8) to 250 GEL ($81.8). As for pensioners above 70 living in highland areas, their pensions increased to 300 GEL. Back in April, Georgian Finance Minister Ivane Matchavariani said that Georgia intends to begin indexing pensions to inflation and economic growth. The pension increase for people less than 70 years old will be calculated based on the inflation rate, while pension increases for people above 70 will be adjusted based on 80 per cent of economic growth as well as the inflation rate.

TBC Capital predicts 4.5% – 5.5% drop in Georgian economy in 2020
TBC Capital predicts the Georgian economy will shrink 4.5% – 5.5% this year, though also forecasts 5% – 6% economic growth in 2021. In a June report, the forecast for 2020 tourist inflows and FDIs deteriorated, although expectations of foreign trade and remittances improved. TBC Capital wrote that a sharp depreciation of the Georgian currency is unlikely and that by the end of the year, the lari will stabilize at 3.0. As for inflation, the bank expects it to fall to 4.5% by the end of this year, while it expects the refinancing rate to fall to 7.75% by that time.

E-commerce down 17% in May
Georgians spent 260 million GEL on e-commerce purchases in May 2020, which is 55 million GEL or 17% less than the same period in 2019. The total volume of internet transactions in January – May 2020 decreased in Georgia by 7% (101 million GEL). Meanwhile, the volume of payments made at POS terminals at trade centers and malls had hit a record high in December 2019 amounting to 930 million.

Hotel occupancy in Batumi and regions up in June
TBC Research reports occupancy of hotels in Batumi and in the regions rose in June by 9% and 31% respectively. Occupancy rates in mid-June in regional hotels hit 60-80%, whereas in Batumi they wereit was 30-45%. Average daily rates in June were down in Tbilisi hotels by 30%, while in Batumi they were down 40% and 50% in the regions.

Georgian government spends 32.5 mln GEL on quarantine spaces
The Georgian state had spent a total of 32.5 million GEL on quarantine spaces as of June 5, notes a report on the measures taken by the government during the peak of the epidemic. As of May 22, this had included 84 hotels with over 6,500 beds, which had served more than 19,000 citizens quarantined after returning to Georgia. Hotels were used as quarantine spaces in Georgia beginning March 10.

Inflation rate at 6.1% in June
Geostat data show inflation hit 6.1% in June, with prices for food and non-alcoholic beverages increasing on average 13.6%, with milk, cheese and eggs (17.2%), fish (15.8%), coffee, tea (14.8%) and oils and fats (13.5%) recording particularly steep inflation.

Georgia opens summer mountain resorts, permits open air events
The summer season in Georgia’s mountainous resorts of Gudauri, Bakuriani and in the Svaneti region have opened to tourists as of July 10, Georgia’s Mountain Resorts Development Company reports.
Guidelines and regulations to insure proper social distancing and hygiene have been put in place at the resorts. Meanwhile, the government ruled that open air cultural events can restart on July 13, including open air exhibitions and other types of outdoor activities.

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