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
How much will the Easter feast cost you – Report from Georgian market
Customers complain about increased prices while traders complain about lack of customers
Environmentally Friendly Standards open the gate to the EU Market
UNIDO - Helping Georgian business get cleaner, cheaper and thus, more competitive
“I’m not saying that all is fine but on the other hand, not everything is that bad” - Exclusive Interview with Nodar Khaduri
The devaluated GEL, increased prices and an unpredictable business environment – this is hardly a full list of problems revealed lately.
Desperate for Tax Leniency, Car Dealers Ask Government for Bailout
Car re-export, a field that dominated Georgian exports for almost a decade, dropped by almost 47 percent lately as a result of the double impact of the national currency’s devaluation
Subversive Russian cheese disguised as Sulguni infiltrates Georgian markets
Recently, Sulguni cheese of dubious origins has appeared on the Georgian market. As investigations reveal, it originates from the Russian city of Krasnodar
Where Will the New Silk Road Lead Georgia?
Just recently, Georgia and China have signed an agreement within the framework of a joint project “New Silk Road.”
Will the EU accept goods made in Georgia from Turkish materials as Georgian?
As the Ministry of Economic Affairs claims, the fact that the Deep and Comprehensive Free Trade Area (DCFTA) agreement with the European Union
Who is responsible?
Who is responsible?
The Lari Devaluation Saga Misses the Responsibility Chapter
Georgian Rockefeller’s Business Empire that Started with a Sweater
Soso Pkhakadze, president of Wissol Group shared his business history, future plans and other interesting details in his conversation with Palitra TV.
Let there be light: new lamps coming to Tbilisi’s streets
City of Light LTD, which is responsible for providing the city with outdoor lighting, was established in 2010 by the City Hall. In 2014, after local elections, Vasil Khorava
IMF Recommendations - More Questions Than Answers
Increasing certain taxes or budgetary spending cuts and continuing the floating exchange rate with limited interventions – these are the key recommendations
“I Cannot Say that Shavliashvili is a Successful Minister” - No-Nonsense with one of Ivanishvili's most trusted cadres
Why does it happen so that in the regions only one company participates in the majority of bids announced by the state? Doesn’t this pose a significant risk of corruption in the public structures?
“Opening the Abkhazian Railway will bring the country at least 300 million USD annually”
The recent information about the alleged sale of Georgian Railway’s share was followed by a big stir. It also poses a potential security threat as this paper has mentioned in the paste.
“Tighten Belts,” They Said. “Decrease Expenses,” They Said.
In response to the government’s declaration to “tighten belts and decrease administrative expenses,” Transparency International Georgia has published information
“IMPEACHMENT OF NBG PRESIDENT SHOULDN’T EVEN BE CONSIDERED”
Interview with ex-President of the National Bank of Georgia Roman Gotsiridze
Prices increase on many food products
As numerous markets have informed InterPressNews, prices have increased on almost all kinds of food products.
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.
PHOTO OF THE DAY
GEL Exchange
USD
1
USD
2.2535
EUR
1
EUR
2.4390
GBP
1
GBP
3.3868
RUB
100
RUB
4.4389
Other Stories
Georgia is in the midst of an economic maelstrom, Euronews reports.
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.