Posted: 2 years ago

Russia’s Ratio in Georgian Economy

Russia’s fierce reaction came after protest rallies broke out in Tbilisi against the speech that Russian parliament member Sergei Gavrilov delivered from the seat of the Georgian parliament’s chairperson – Gavrilov was made to leave the parliament building and anti-occupation and antigovernment rallies started in Tbilisi.

Under Vladimer Putin’s decision, direct flights between Georgia and Russia will be suspended on July 8. According to statistics, in July 2018 this transportation channel handled 40 000 passengers.

Under the June 21 decree by Russian President Vladimer Putin, Russian airlines were banned to perform flights to Georgia. Direct flights will not be performed from Russia to Georgia starting July 8. Moreover, Putin urged Russian citizens to refrain from visiting Georgia. As a result, many Russian citizens started annulling orders and bookings. Russian tourism market, which increased its influence on Georgian economy over the past years, today has become economic pressure mechanism in the hands of the Kremlin.

Flight ban brought expectations that Russia may employ other mechanisms too. How Georgian economy depends on Russia and what financial losses the country will bear if the northern neighbor does not confine with only flight ban and employs other mechanisms too.

More than 1.4 million Russian citizens arrived in Georgia in 2018 and their number grows year to year. Over 1.13 million visitors arrived in Georgia from Russia in 2017. The country hosted 8.7 million international tourists in 2018 and they spent 3.2 billion USD, including Russian tourists spent 2 billion USD in 2018.

In January-May 2019, a total of 539 432 Russian visitors arrived in Georgia, that is 21.6% ratio in total visits, including 429 179 Russians stayed in the country for more than 24 hours. Consequently, this very category is considered as tourists and their ratio accounts for 25.9%. Forecast expenditures of tourists in 2019 made up 1.1 billion USD, however, if the inflow is ceased by the end of 2019 the amount will decrease by 750 million USD.

Special focus should be made on investments and money transfers from Russia to Georgia. According to unofficial indicators, today about 1 million citizens of Georgia live in Russia and FDI inflows from Russia in January-March 2019 made up 14.3 million USD (total FDI inflows in the reporting period made up 281.1 million USD and the Russian ratio amounted to 5%). The figure made up 60 million USD in 2018 (total 1.232 billion USD), 43.7 million USD in 2017 (total 1.894 billion USD); FDI inflow from Russian is not much, but it makes certain impact on economic revival in Georgia;

As to money transfers in January-May 2019, the figure made up 163.7 million USD, 24.7% in total money transfers (662.4 million USD in 2019), 457.1 million USD in 2018 (1.579 billion USD), and 455.4 million USD in 2017 (total 1.387 billion USD).

Russia’s ratio in money transfers from Russia in 2013 was 54% in total inflows, while the figure constituted 25% in January-May 2019. In the same years the ratio of EU rose from 28% to 39%.

Money transfers from EU in January-May 2019 surpassed money transfers from Russia by 57%, while transfers form Russia was twice higher in 2013 compared to EU transfers.

Today Russia remains major exporter country for Georgia. Our country exported 218.5 million USD products to Russia in January-May 2019, which is 14.9% in total exports. In 2018 Georgia exported 437.3 million USD products and 396.6 million USD products in 2017. Consequently, in the event of economic embargo, Russia market should be replaced by other markets as soon as possible to save Georgian business and economy from collapse;

At the same time, Russia is one of the major imports markets and ranks second after Turkey. Georgia imported 349.5 million USD products from Russia, which is 10% in total imports (in January-May 2019), 935.6 million USD in 2018, and 786.8 million USD in 2017.

Winemaking field should be analyzed separately. According to National Wine Agency, in January-April 2019, Georgia exported 26 million bottles to 38 countries, including 16 850 331 (64.8%) bottles to Russia.

In whole, Russia’s ratio in exports tourism, money transfers and FDI inflows makes up 8.5% in Georgian economy.

We have made sure again that Russia is not a reliable economic partner. Despite this Georgian entrepreneurs maintain active trade relations with our northern neighbor and Russia’s leading position in exports proves this.

Russia’s economic engagement in Georgian economy is not limited with only money transfers and external trade. We should take into account Russian capital in Georgian business, including: power sector, telecommunications, industry, finance sector, construction business, oil products and food products. In this situation both the Georgian Authorities and major businessmen should have preliminarily developed anti-crisis plan so as the country meet any Russian economic blackmail ready and prepared.