Georgia's real GDP grew by 10% in January-October compared to 10.5% in the same period last year, according to data released by the National Statistics Service of Georgia on November 30. In October, the country's economy grew by 8.3% y/y. Compared to 2021, construction, transport, finances and insurance, the mining industry, restaurants and hotels, as well as arts, entertainment and recreation all saw growth in the first 10 months of 2022. Both manufacturing and the real estate sector experienced decline.
The International Monetary Fund (IMF) increased its forecast for Georgian growth from 3.2% to 9% for this year as “expected negative effects of the war in Ukraine have not materialised so far”.
At the end of a mission to Georgia from September 8-14, the IMF issued a press release on September 15 that reported that, “despite a challenging external environment, the Georgian economy is set to achieve strong growth and buoyant fiscal revenues this year”.
The IMF based the huge growth revision on a faster-than-expected recovery of tourism, a surge in inbound money transfers, and immigration-related flows that have helped strengthen the external position and sustain domestic demand. However, IMF also urged that there are notable downside risks including a sharper slowdown in major trading partners, tighter global financial conditions, possible weakening of tourism and other external inflows, and sustained high commodity prices.
The World Bank upgraded its forecasts for Georgia on account of the strong performance recorded during 2022, with growth projected to reach 8.8% by the end of 2022.
Inflation is expected to remain in double digits in 2022, although price pressures are likely to diminish towards the end of the year. Inflation is expected to decline in 2023 and beyond, as international oil prices and supply-side bottlenecks ease.
The Georgian government on November 28 announced a programme for developing new tourism destinations while upgrading existing tourist spots in the country, allocating a total GEL200 million ($73.40mn).
During the announcement, Prime Minister Irakli Garibashvili said that tourism was one of most “important contributors” to growth in the Georgian economy and among the top “priority areas” for the government.
Georgia received $2.9bn from international tourism between January and October of this year, surpassing pre-pandemic levels observed in 2019.
The Georgian National Tourism Administration said on November 17 that revenues from international tourism had increased by 183.2% y/y in the first 10 months of 2022. The figures showed a 100.2% recovery from the same period in 2019. Back in October, Georgia’s Minister of Economy Levan Davitashvili said the government was expecting about $3bn in income from the domestic tourism sector in 2022.
Georgian inflation falls to 10.6% in October. Higher food and energy prices (as well as utility costs) account for most of the inflation this year. According to high-frequency surveys from May 2022, about three-quarters of the respondents from low-income households reported having reduced food consumption in response to rising prices.
The National Bank of Georgia (NBG) has kept the monetary policy rate unchanged since March, at 11%, following a meeting of its monetary policy committee on October 26, after gradually increasing the rate since March 2021 by a total of 300 bps. The bank said domestic inflationary pressure was still high despite the fact that inflation had retreated from its earlier peak.
The unemployment in Georgia fell to 18% in Q2, according to Geostat. The number of hired employed increased by over 4.4%, reaching 867,900 individuals.
In trade and transport related news, the Trans-Caspian International Transport Route (TITR) is gaining importance as trade through its member states is growing amid the necessity for more trade route volume that bypasses heavily sanctioned Russia. Money inflows could last longer than initially expected, and Georgia could benefit from some trade diversion as transport corridors are reconfigured. Over the past months, the Georgian railway and ports in Poti and Batumi have reported rising freight flow, while long lines of international trucks at Georgian borders have become one of the most noticeable effects of the Ukraine war in Georgia.
Georgia's foreign trade turnover exceeded $15bn over the same period in 2022, which is 33.5% more than last year. Exports of goods totalled over $4.5bn, up by 34% compared to 2021, while imports reached over $10.6bn, up by 33.3% compared to last year’s figures. Georgia’s trade deficit stood at $6.1n in January-October.
Foreign direct investment in Georgia amounted to $351.8mn in Q2, a 9.1% y/y. According to the statistics service, the expansion is mostly due to a rise in allowed capital and reinvestment indicators.
The United Kingdom ranks first in terms of investment in the country, with $64.7mn. The largest share of foreign direct investment was $76.6mn, which fell on the energy sector.
The volume of money transfers to Georgia from abroad reached $502mn (GEL1.39bn) in October 2022, an increase of 142.9% compared to the same period last year, reports Georgia’s central bank. The largest source of money transfers was Russia, reaching nearly $300mn for just October, whereas overall transfers from Russia in 2022 amount to $1.4bn. The spike in financial flows can be attributed to the flow of migrants from Russia who have found at least temporary shelter in Georgia from the consequences of the Ukraine war.
After dropping in early March, the Georgian lari has appreciated about 20% against the U.S. dollar. Surging financial transfers from Russia has supported the economy’s balance of payments.
Georgian plans to reduce its foreign debt to 40% of gross domestic product (GDP), PM Garibashvili said during the cabinet meeting on September 13. The budget deficit is also expected to go down to 3.2% of GDP, because of the country's "unprecedented, double-digit" growth, according to Garibashvili. The initial budget draft envisaged a budget deficit of 4.4% of GDP and a foreign debt of 51% of GDP.
Georgia’s banking sector indicators remain healthy. Total assets of Georgian commercial banks increased by 0.2% and constituted GEL 68.1bn ($24.76bn) as of the end of September.
Georgian commercial banks' financial reports indicate that 14 banks in the country together earned a net profit of GEL836mn ($285mn) in the first half of 2022. According to the Banking Association of Georgia, 95% of these profits were attributed to the country's two largest banks, TBC and Bank of Georgia. In 1H22, the banks received interest income of GEL2.7bn ($919mn), most of which stemmed directly from loans made to citizens and businesses.
On the political front, Georgian parliamentarians began work on the de-oligarchisation bill to fulfill EU requirements for receiving membership candidacy status. Back in September, EU foreign policy chief Josep Borrell said that Georgia needs to accelerate reforms in areas such as the rule of law, the independence of justice, and media freedom before it can be granted the status of a European Union membership candidate.
Ukraine may suffer one of the worst falls in GDP after a war, the European Bank for Reconstruction and Development (EBRD) predicts in its 2022/23 Transition Report.
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Georgia's real GDP grew by 10% in January-October compared to 10.5% in the same period last year, according to data released by the National Statistics Service of Georgia on November 30. In October, ... more