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
GEL is stabilizing - National Bank’s President
The GEL is stabilizing as a result of yesterday’s and today’s trade activity - said President of NBG Giorgi Kadagidze.
Are Georgian Consumers Protected from Counterfeit Goods?
In what way are Georgians protected from accidentally purchasing and using counterfeit goods? Organizations dedicated to the protection of consumer rights
Refusing to Raise Pensions, Government Offers an Alternative Pension System
Prior to every single election, a pension increase remains one of competing political forces’ main promises. But all too frequently, it continues to remain nothing
Saving Private Lari - Georgian Currency at a Critical Point
The Georgian currency has not sunk so low since 2004; it did not happen even during the double impact of the August War and financial crisis in 2008.
Dollar exchange rate hits 2.19 GEL
1 dollar is now equal to 2.19 GEL. Georgia’s national currency has depreciated even further.
A Georgian-Chinese railway: An opportunity or a fantasy
A direct railway connection between Georgia and the Chinese province Xinjiang brings new prospects to Georgian transit potential on the historical Silk Road route, the Georgian government believes. Sector analysts are less optimistic.
Better control and protection for Georgian alcoholic drinks
A new system of quality control and certification of Georgian wines and alcoholic drinks took effect on February 16. The new regulations aim at making life easier for businessmen and consumers easier, the Georgian government claims.
Assets of the "International Bank of Azerbaijan-Georgia"  for  year 2014 increased by 20.5%
The assets of the "International Bank of Azerbaijan-Georgia" ("IBA-Georgia") as of January 1, 2015 amounted to 145.9 million lari, increasing by 20.5 percent.
Winds of Fortune – Georgia’s first steps towards taming the wind energy
Very soon Georgia will see emergence of its first wind power plant, named “Kartli.” Construction of 20-megawatt wind farm will begin in 2015 in Gori region.
Georgian Wine’s uphill battle for its rights in China
Sakpatenti, National Intellectual Property Center of Georgia, won the case over the famous Georgian wine brand Khvanchkara in China and expects that appeals
GAZ back in Georgia - Is government set to purchase Russian special purpose vehicles?
Near the end of 2014, at the Tbilisi Event Hall, the Russian auto manufacturing company GAZ Group held a presentation for GAZelle light commercial vehicles;
What will higher gas tariffs bring us?
Utility Costs Must be Affordable – Why Should People Overpay?
Controversial Law on TV Advertising raises concerns
The National Communications Committee has brought a new legislation before the parliament. Under this legislation, TV companies will have to comply with new regulations
Dollar exceeds 2 GEL
Dollar exceeds 2 GEL
According to data from the National Bank of Georgia, 1 dollar costs more than 2 GEL again. The bank has set a new exchange rate according to which the GEL has depreciated.
Ukraine and Georgia in 2020
In 2009-2010 Irakli Gogava acted as a chief political consultant and field operations manager of Ukrainian leader, Viktor Yushchenko. Before 2014, he presided
Agricultural Cooperatives in Georgia: Hopes and Challenges
Not that long ago, farmers’ cooperatives were ignored or totally misunderstood in Georgia. They were often associated with the kolkhoz, the ancient Soviet collective farms.
Monopolies do not stop at 49 percent - Rosneft Deal Jeopardizes Georgia’s Strategic Energy Transit Corridor
When it comes to some topics in Georgian politics, things are eerily silent. Recently 49 percent of Georgia’s Petrocas oil terminal in Poti – one of the few in the entire
GEL gains value
GEL gains value
Georgia’s national currency has reportedly gained value against USD. Though, this gain is not very significant.
Georgian Lari continues to depreciate
Georgia’s national currency continues to depreciate against USD.
From Georgia to Ukraine 2020: Kiev Aims High
In Georgian Journal, we already covered the government’s six-year development strategy plan, the GE 2020, at length. Indeed, as our esteemed consulting
Georgia’s Murky Oil Oligopoly Syndrome
Is the Georgian fuel market monopolized? – This is the question that the Competition Agency, an anti-trust body of Georgia, must to find an authentic answer
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.
GEL Exchange
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.