Strong investment rebound seems increasingly uncertain for Georgia
03 March, 2011
Strong investment rebound seems increasingly uncertain for Georgia

Georgian economy is predicted to grow by more than 5 % this year; price hike may wane in the second half of the year and inflation rate shall slump to one-digit figure, the International Monetary Fund projects.
Based on preliminary findings of International Monetary Fund (IMF), aired on February 22, 2011, Georgian real GDP grew by over 6% in 2010. The growth was broad-based across all economic sectors, caused by a rebound - of credit to the private sector and

strong export demand. The recovery of private sector growth enabled the government to withdraw some of the fiscal stimuli of 2009 and improve its financial position by cutting down current spending. As a result, the government deficit narrowed to 6.6% of GDP in 2010 from 9.2 % in 2009.
The external position has also improved since mid-2010, as evidenced by the absence of exchange rate pressures, which allowed the Central Bank to strengthen its net international reserve position. While Foreign Direct Investment (FDI) inflows are well below the initial forecast their level (estimated at under USD 600 million or 5% of GDP in 2010) remains quite respectable by international standards, the IMF report informs.
As in most other countries, consumer price inflation in Georgia has risen unexpectedly since mid-2010, reaching 12% in January 2011. Nearly all of this inflation originates from hikes in the international prices of food and energy: since mid 2010, the price of primary food commodities has risen by about 20% (wheat prices by nearly 60%) and the price of oil by 30%. The erosion in living standards from these price shocks is of concern, particularly for the most vulnerable sections of society, and should be addressed by maintaining adequate social safety nets. In the absence of additional external shocks IMF expects prices to stabilize in the second half of 2011 and the inflation should decline gradually back to single digits by the end of the year.
The policy response to the twin crisis of 2008-09 succeeded in averting a much deeper economic contraction, but vulnerabilities remain, the IMF experts warn.
The countercyclical fiscal response led to a significant increase in public debt (from 22% of GDP in 2007 to 39 % in 2010). Private sector balance sheets have also been weakened by the crisis, as evidenced by higher dollarization and indebtedness and, for the banks, a deteriorated loan portfolio, although the increase in non-performing loans (NPLs) also reflects vulnerabilities built-up prior to the crisis. Meanwhile, the external environment is likely to remain volatile and the expected strong rebound of FDI appears increasingly uncertain.
“Against this background, the main economic policy challenges over the next few years are to create the conditions for solid economic growth even in the absence of a strong rebound of FDI, strengthen public balance sheets, maintain price and external stability, and prevent the emergence of new imbalances and systemic risks in the private sector as credit and external borrowing resume,” the IMF report states.
The IMF mission has revised upward its real GDP growth projection for 2011 to 5 percent. Public investment has been crucial to sustaining growth during the crisis and enhancing the economy’s productivity through infrastructure improvements. The IMF mission shares the government’s view that private sector investment should replace government investment as the motor of growth going forward and agrees that sole reliance on FDI may not be sufficient to unlock the economy’s growth potential in the post crisis environment. It supports the authorities’ intention to adopt a more proactive approach to promote productivity growth and attract private investment in high potential sectors such as agriculture and energy. Sector development programs could include structural reforms and targeted public investment, which however would need to be consistent with a compression of the overall capital budget. While public private partnerships and state enterprise investment may also be effective instruments of development, such ventures should be considered with caution in view of the large direct and contingent fiscal costs which they may generate.
To preserve external competitiveness of the country the crisis-related real exchange rate depreciation has moved the lari exchange rate much closer to equilibrium. However, the current account deficit (10% of GDP in 2010) remains large by most measures, including by comparison with other emerging market economies in the region. In line with a more conservative view of FDI inflows, the mission considers that policies should aim at reducing the current account deficit to 5-6% of GDP over the medium term.
The government and the central bank face large external debt service obligations in 2012-14 (including to the IMF), peaking at just over USD 1 billion in 2013 (equivalent to 8% of GDP). Georgia’s sound policy performance and overall macroeconomic conditions and prospects place it in a good position to tap international financial markets to cover a good part of these obligations—the rest being repaid out of the accumulation of international reserves and T-bill issuance.

Other Stories
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
Georgia second among the fastest growing tourist destinations in Europe
Georgia is among the fastest growing tourist destinations in Europe. The data is published by the UN World Tourism Organization.
Bitmain launches world digital mining summit in Tbilisi, Georgia
Bitmain CEO Jihan Wu and Roger Ver, CEO of Head Speaker List featuring Circle, and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23
TBC Bank and Gazelle Finance have teamed-up to support Medical City, a leading healthcare provider in the western region of Georgia to launch the Western Regional Center Of Modern Medical Technologies.
Equivalent to buried treasure – resources that are underused in Georgia
For 2018 the IMF Commission has forecast an annual economic growth for the Georgian economy of about 5,5%.
Does the quality of Georgian wine increase and how the export affects it
If we look at the data collected about modern Georgian wine, we will find out that the Georgian wines produced between 2015-2017 are much better in terms of their quality and Oenologic features rather than the wines produced between 2009-2011.
Japan simplifies the visa requirements for Georgian citizens
Diplomatic and economic relations between Georgia and Japan are now moving to a new phase. Recently Japan has decided to simplify the visa requirements for Georgian citizens.
M&S (Marks and Spencer) and H&M collections to be produced in Georgia
Garments manufacturer MGMTEX will start production of the M&S and H&M trendy collections from this September.
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Exchange Rates
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
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
GEL Exchange
November 2018
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30