2013 - Test Year of Georgian Economy
17 January, 2013
2013 - Test Year of Georgian Economy
The year of 2013 promises to be a test year of Georgian economy: if political and business environment will remain stable and liberal and new government shows due management skills, the country may enjoy the forecasted USD 2 billion of Foreign Direct Investments (FDIs) inflow in 2013. Otherwise, with its small market capacity against the backdrop of the impending second tide of economic crisis Georgia seems scarcely able to attract attention of foreign investors.
Georgian new government came with new plans and big expectations to attract USD 2 billion of FDIs this year. A newly created Agriculture Fund focused to attract private investments for agriculture development in the country as well as Partnership Fund managing with the state-owned assets also plan to attract USD 1 billion and USD 2 billion respectively.
The investment plan seems quite ambitious if we take into account that USD 2 billion inflow in Georgia in 2007 alone was the biggest ever investment in the country since its 20 years of independence. The figure has only been shrinking starting 2008 due to the August war conflict with Russia and global economic crisis. Investments started recovering slowly to around USD1.1 billion in 2011. First two quarters of 2012 were more-less hopeful with USD 269.4 and USD 219.4 million respectively however the figure dropped to USD 195.4 in the third quarter and is believed to be even less in the last quarter of the year [official statistics of the fourth quarter is not released as yet] that lags much behind of USD 316.6 million and USD 342.6 million of similar periods of 2011.
Economic growth also slowed down since October of 2012: in October GDP grew by 6.7% and 8.2% in the first two quarters of 2012 but dropped to 7.5%, in the third quarter. Real economic growth reduced to 5.5% from 8.8%, 6.5% and 7% of July, August and September of 2012 respectively.
Traditionally the FDIs and economic growth figures are higher by the end of the year but since the year of 2012 was the year of parliamentary elections economic analysts assure the economic and FDIs slow down was the result of political uncertainty that always follow elections. Specifically this past elections that was crucial to Georgia as brought the first ever peaceful shift of power in the country: Georgian Dream political coalition won power to the ex-ruling National Movement.
Hopes that situation would have become clearer after elections fell flat. Political screen aggravated and inclined to diarchy as far as Mikheil Saakashvili, President of Georgia coming from National Movement, acts as an ardent opposition of new government and does not abash to render to black PR of governmental policy sending false information to the international community that new government undermines democracy and business climate of the country.
Saakashvili’s presidency expires in October of 2013, the year he was supposed to cohabitate with new government. However, Saakashvili who has an authority to dismiss the new government in 6 months seems willing to use this possibility. The snap parliamentary election is also not ruled out. This kind of internal political risks plus the impending second tide of economic crisis globe over makes economic connoisseurs less optimistic on account of ambitious FDIs prognosis to Georgia in 2013.
“How can I attract investors when Saakashvili comes out and sends false information that investment projects are suspended in Georgia and the business climate is deteriorating? Ok I’ll tell them that this is a lie but who are investors supposed to believe me, an ordinary citizen or the President of the country?” Ditrikh Muller, a co-founder of Georgian Investment Group, wonders. “I expect few investments to come on our way until Saakashvili stops making the black PR of Georgia.”
Prospects of reopening Russian market [closed in 2006 to Georgian wine, mineral water and agriculture product for alleged sanitary reasons] where Georgia used to send more than half of its export before 2006, creates hopes that the foreign trade will be encouraged and Georgian economy may get an additional drive force to develop its export but the effect will not be tangible immediately in 2013. Georgian business needs to restore its niche lost six years ago at Russian market that may take an year in the best case – the reality is that negotiations with Russian side discussing the trade-related details are still on and nobody can say when this market opens its gate up in fact.
Irakli Lekvinadze, an economic analyst and partner of Sales Management Company that provides marketing and consulting service to Georgian mineral water, soft drinks and agriculture product, thinks Russian market is a near prospect as far as potential partners are already on contact for demand on Georgian product do exist at Russian market.
He expects the forecasted USD 2 billion to come to Georgia in 2013 if political situation is not aggravated and business regulatory legislation remains liberal.
According to Muller, against the backdrop of pestering global economic crisis and recession chances to attract investments to Georgia are fewer. Political stability and clear, positive business policy is crucial to this end. He does not expect Russian market to be a big relief if situation in Georgia does not change to the positive: Saakashvili should step down and new government must show due management skills that seem quite incompetent at the moment.
“Two months passed and no palpable changes improving business climate ensued: expensive credits price did not change, investors’ rights and property rights are not protected on the legislative level, and government has not disclosed any clear investment plans and opportunities. Moreover, Georgian Prime Minister Bidzina Ivnishvili, frequently changes his mind and decisions that is a negative signal. New government even lacks PR technologies of which Saakashvili was a master,” Muller said. “May be they have some good plans but nobody knows their details and investors cannot figure out where to put money.”
Other Stories
What can you do in Georgia with one dollar?
At the current rate, $1.00 amounts to 1 lari and 95 tetri in Georgia. What can you do with this money?
Anaklia: After Kazantip
Anaklia: After Kazantip
No precise information about how many millions the former government poured into the Anaklia-Ganmukhuri development projects has been released yet.
The Nenskra Project Looks Immature
The to-be-built Nenskra Hydro Power Plant with an investment price tag of 1 billion USD and a 280 mega-watt capacity looks pretty immature and non-transparent.
The Eurasian Union – Risks and Benefits for the Georgian Economy
Whether or not the EEU activation hurts the Georgian economy depends on whether or not free trade agreements will be canceled with the EEU member countries.
JSC „International Bank of Azerbaijan – Georgia” has attracted a credit of 10 million US dollars
JSC “International Bank of Azerbaijan – Georgia” has attracted a credit of 10 million US dollars from CITIBANK, N.A - a reliable partner of “International Bank of Azerbaijan” group.
Rosneft’s Georgian Deal – Disgrace or Benefit?
Russian state energy giant Rosneft will soon enter Georgias privately owned Poti oil terminal. The deal allows the Russian giant to control energy resources
Kakha Bendukidze and Georgia’s failed experiment - oDR
Kakha Bendukidze died in November 2014 at the age of 58. Bendukidze directed the whirlwind of economic reform that characterised Georgia from 2004 to 2008-9, openDemocracy reports.
Gross external debt of Georgia is approximately 13.1 billion USD
National Bank of Georgia has published gross external debt statistics which are in line with BOP statistics. They include both public sector (general government, public corporations and national bank) and private sector (banking and other sectors) external debt.
Is buying an apartment in a building under construction worth it?
“Selling air” – an occurrence that has left thousands homeless
Meet Mikheil Khubutia – Putin’s Favorite Georgian Billionaire
“He is also always welcome on the Kremlin’s doorstep, something very few Georgian businessmen can boast, and as he himself stated, is a favorite of Russia’s President Vladimir Putin.”
“Georgia is the only coastal country with no fishing industry” - Saganelidze speaks of unfair treatment
“Georgia is the only coastal country with no fishing industry.

Turkish companies completely control this business: they catch the fish and then they sell it to us.
Development Bank – a breakthrough in our investment environment?
“China’s Development Bank is elaborating a project on financing Georgia’s electric trains and railway cars”
IMF approves $58.1 million for Georgia
IMF approves $58.1 million for Georgia The International Monetary Fund (IMF) Executive Board has approved $58.1 million in assistance for Georgia after completing the first review of a program, the Finance Ministry says.
Georgia’s winter resorts facing tourist deficit
In comparison with previous years, the owners of hotels near winter resorts are not expecting a good turnout this year. The owners of hotels speak about several
Progressives from the Left Take a Swipe at Previous Government’s Libertarianism
Last week, the new non-governmental organization “Georgian Progressive Forum” had its presentation. The aim of the organizations is to promote fair socially-oriented
How Mamuka Khazaradze made his first million
Just recently, Mamuka Khazaradze was named “Entrepreneur of the Year,” and very soon he will compete for the title of “Worlds Entrepreneur of the Year.”
The Rouble in Rubble: It started with a fracture
In a surprise move on Tuesday, Russia raised rates from 10.5 percent to 17 percent at 1 a.m. Moscow time. The ruble was propped up briefly, but then all gains
A global view on Georgia’s currency
London-based financial analyst Thomas Kapp provides an outside view on the Georgian currency’s devaluation:
Currency depreciation smells of speculative deals
According to financial analyst Lia Eliava, “The NBG cannot implement its key task to ensure stable prices in Georgia, which makes a huge impact on the welfare of the country.
BOG is playing monopoly as PrivatBank leaves Georgia
PrivatBank, the largest commercial bank of Ukraine, leaves the Georgian market. Bank of Georgia, a local powerholder, buys the Georgian assets of PrivatBank
“We are not going to produce big volumes; we are going to produce quality bio-products” -Minister of Agriculture
The year is coming to the end and ministers are summing up the results of two-years of activity of the current government. Agriculture, one of the most prioritized sectors
The Lari’s Black Friday
The Lari’s Black Friday
By the end of last week, the lari experienced yet another Black Friday, dropping hard against the dollar with the official exchange rate being 1.9527 GEL per 1 USD.
Lari becomes stable by about 3 points
Georgian currency has become more stable by about 3 points. National Bank of Georgia has established a new official exchange rate for GEL against USD.
Georgia's 5 richest men
Georgia's 5 richest men
Georgia was never distinguished by many of its citizens counting themselves among the rich. Her economic development, size of her market and, of course, political situation
GEL exchange rate against USD slightly increases
The GEL exchange rate against the USD has slightly increased. Some currency exchange booths sell 1 USD for 1,90 GEL and buy it for 1.85 GEL
Other Stories
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
Some of Georgia’s commercial banks are already buying at 2 GEL per $1. Their webpages are publishing information regarding national currency’s exchange rate in real-time mode.
Georgia's central bank governor Giorgi Kadagidze says Ukraine is in the same bind as Georgia was in when Russia banned its neighbor’s exports in 2006
Food and drinks at the territory of “Kazantip Republic” became cheaper. Some bars and food providers reduced their prices by 20% to 50%. For example, khinkali that cost 2 GEL
On the 20th of August, at 9 in the evening, “Kazantip” festival was declared officially open, with both multitudes of foreign guests and local denizens attending.
From now on, Georgian national currency, the Lari, will have its own symbol. Georgia’s National Bank declared a contest to select the symbol in December of 2013.
Georgian auto business is under the threat of collapse. There’s an unusual lack of people at Rustavi Automarket, yet despite the forced reduction of prices recently, many cars
Georgia has signed a so called Association Agreement with the European Union in Brussels.
Gardabani’s greenhouse economy is on its first stage of replacing 30% of imported tomatoes with locally produced ones.
“GEL rate has been stable, and there’s been a tendency of USD decline“, the Minister of Finance Nodar Khaduri stated.
GEL Exchange
EUR
1
EUR
2.2397
UZS
1000
UZS
0.8203
GBP
1
GBP
2.9861
SEK
10
SEK
2.3979