TI Georgia: Georgia’s Economic Dependence on Russia Increased in 2022
Transparency International Georgia, a local watchdog, released a new report on February 22, according to which Georgia’s economic dependence on Russia increased in 2022, compared to previous years that is mainly “due to the soaring remittances.”
“Georgia’s growing economic dependence on Russia constitutes a threat to the country, as Russia has repeatedly utilized economic relations to politically leverage independent countries,” the report notes.
According to the report, in 2022, Georgian exports to Russia increased by 6.8% and amounted to USD 652 million. Imports from Russia increased by 79% and amounted to USD 1.8 billion. “The share of exports to Russia was 11.7% of the total exports of Georgia, which is 2.7 percentage points less than it was in 2021. As for the imports, the share of imports from Russia increased from 10.1% to 13.6% in the total imports of Georgia, which is “the highest in the last 17 years.”
“Overall, in 2022, the share of trade with Russia in Georgia’s total trade grew from 11.4% to 13.1%, which is the highest in the last 16 years.”
According to the report, “traditionally, Georgia’s wine exports are highly dependent on the Russian market” and the share of the Russian market in the total wine exports of Georgia increased and reached 63.8% which is the highest rate since 2013. In 2022, wine was the top of Georgia’s exports to the Russian market with USD 161 million and ferroalloys were the second largest with USD 109 million, followed by the export of non-alcoholic beverages – USD 90 million and light vehicles – USD 76 million.
As for the imports, oil products were top of Georgia’s imports from Russia with USD 623 million, followed by wheat and wheat flour – at USD 128 million, natural gases (gas) at USD 112 million, coal and coke – at USD 78 million.
Tourism and remittances
The report compares the data for 2022 and 2019, noting that due to the pandemic, number of Russian visitors decreased substantially in 2020-2021.
According to the report, in 2022, 1.1 million visitors came from Russia which is 26% less compared to 2019. However, the number of Russian visitors in September-December 2022 exceeded the figure of September-December 2019 by 14%. “The increase since September can be related to the military mobilization announced in Russia on 21 September.”
In 2022, the share of Russian visitors in the total number of visitors to Georgia was 20%, which is almost 2 times higher than the rate of 2021, and 4.3 percentage points more than the rate of 2019. “The share of Russian citizens among visitors to Georgia has never reached 20% before.”
Referring to the data of the National Bank of Georgia, TI Georgia notes that in 2022, Russian visitors spent USD 891 million in Georgia, which is 15% more than they spent in 2019 and 5 times more than in 2021.
“The share of income from Russian visitors in the total income from visitors to Georgia was 25.3% in 2022. The figure was the highest in 2018 – 26.3%,” the report notes.
As for remittances, last year USD 2.1 billion was transferred from Russia to Georgia, which is 5 times more than it was in 2021. The situation related to remittances changed significantly due to the Russia-Ukraine war. In January-March 2022, an average of USD 24 million per month was transferred from Russia to Georgia. The remittances began to grow rapidly from April when USD 133 million were transferred, and in May, a record amount of USD 314 million was sent.
“The share of money transferred from Russia in the total remittances received by Georgia increased to 47.3%. The last such high rate was recorded in 2014,” according to the report.
Foreign direct investment
TI Georgia said that in January-September 2022 (the data of the 4th quarter are not yet published), USD 33 million of foreign direct investment came from Russia, which is 51% less than the figure for January-September last year.
Citing BMG, the report says that in the third quarter of 2022, foreign direct investment from Russia amounted to USD 42 million and USD 29 million was invested in the real estate sector.
According to the report, in 2022, about 15,000 Russian companies were registered in Georgia, which is 16 times more than the number in 2021. “A total of 22,400 Russian companies are registered in Georgia, and 66% of them have been registered since the start of the war in Ukraine.”
“95% of the companies registered since March are sole proprietors. This indicates that a part of Russian citizens moved to Georgia to live and do business for a long time.”
TI Georgia recommendations to reduce Georgia’s economic dependence on Russia,:
· The Georgian government to start working more actively and expeditiously on concluding free trade agreements with all strategic partners with whom we do not yet have such an agreement.
· Subsidies from the state budget (grants, concessional credit, etc.) should not be given to businesses that increase economic dependence on Russia.
· There should be a different practice for Russian citizens to register companies in Georgia.
- 08/11/2022 – TI – Georgia Reveals Georgia’s Increased Economic Dependency on Russia
- 29/09/2022 – Study: 62% of Businesses Negatively Affected by Russia-Ukraine War
- 02/09/2022 – IDFI: Russians Dominant Group Receiving Georgian Citizenship
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