Watchdog: Georgia’s Economic Dependence on Russia Continues to Increase

Transparency International-Georgia (TI), a local watchdog, released a new report according to which the increase in Georgia’s economic dependence on Russia continued in the first half of 2023.

According to the watchdog, from January to June 2023, Georgia’s income from Russia reached USD 2 billion through remittances, tourism, and the export of goods, representing a 1.6-fold increase compared to the income received from Russia from the same sources during the same period in 2022.

“Georgia’s growing economic dependence on Russia represents a threat, as Russia traditionally uses economic relations to exert political pressure on other countries,” TI says.

Foreign Trade

The report says that during the initial six months of 2023, Georgia’s trade with Russia saw a 32% growth when compared to the corresponding period in 2022, reaching a total of 1.3 billion USD. “The share of Russia in Georgia’s total trade has risen to 12.4%, marking the highest in the last 16 years.”

According to TI Georgia, from January to June 2023, the export of Georgian products to Russia experienced a 34% surge, totaling USD 344 million as depicted. Russia’s share of Georgia’s overall exports amounted to 11.3%, reflecting a 1.3 percentage point rise in comparison to the January-June 2022 figure.

“In the first six months of the current year, wine held the top position in the export of Georgian products to the Russian market, reaching 82 million USD. Non-alcoholic beverages secured the second spot with 66 million USD, followed by the export of passenger cars at 53 million USD.”

The watchdog says that in the reporting period, “imports of Russian goods into Georgia increased by 31%, totaling USD 927 million,” adding that “Russia’s share in Georgia’s total imports reached 12.9%, which is 1.1 percentage points higher than the figure for January-June 2022..” TI Georgia concludes that “this marks the highest share of Russian imports into Georgia since 2007. Compared to the first six months of 2021, imports from Russia have doubled.”

In the first six months of the year, the import of oil products have seen the most significant rise, surging fivefold.

Tourism and Remittances

The report shows that the number of visitors from Russia has increased significantly due to the end of the Covid-19 Pandemic and the outbreak of the Russia-Ukraine war. According to the report, in 2022 Georgia received 1.1 million Russian visitors, which is five times more than in 2021, but 26% lower than the 2019 figures.

“In January-June 2023, 578 thousand visitors arrived from Russia, marking more than twofold increase compared to the same period in 2022 although it is still 16% lower than the figure of 2019,” the watchdog continues, adding that “in 2022, Russian visitors accounted for 20% of the total number of visitors to Georgia. During the first half of 2023, the share of Russian visitors increased slightly to 20.2%.”

According to TI Georgia, the country has been recording statistics since 2011, and “the share of Russian citizens among visitors to Georgia has never reached 20% before.”

Referring to the National Bank of Georgia (NBG), the watchdog notes “in the first half of 2023, Russian visitors spent 482 million USD in Georgia, marking a two-fold increase compared to the corresponding figure from 2022.”

Citing Geostat, the watchdog says 62,300 Russian citizens stayed in Georgia in 2022, registered as immigrants.

When it comes to remittances from Russia in the first half of 2023, there has been a surge by 50%, amounting to USD 1.1 billion when compared to the same period last year. “However, during the months of May and June this year, remittances from Russia experienced decline, with a reduction of 259 million USD compared to the same period in 2022.”

Foreign Direct Investment

According to TI Georgia, “In 2022, Georgia received a record-breaking USD 108 million in direct foreign investments from Russia, marking the highest annual influx of Russian capital into Georgia.”

In the first half of the year, Georgia received USD 56 million in direct investments from Russia, which is seven times more than in the same period in 2022. Out of this USD 56 million, USD 27 million was invested in the financial and insurance activities, while USD 18 million went for real estate and USD 7 million for information technologies. USD 4 million was directed towards trade.

Russian Companies

During the period from January to June, 6,539 Russian companies were registered in Georgia.

“In 2022-2023, 96% of Russian companies registered are sole proprietors (individual entrepreneurs), compared to 51% in 2021. 99% of sole proprietors have non-Georgian surnames.”

Recommendations

TI Georgia reiterates its recommendations to reduce Georgia’s economic dependence on Russia:

• The Government should start working more actively and expeditiously on concluding free trade agreements (FTA) with all strategic partners with whom Georgia does not yet have such an agreement;
• As diversifying the wine export market is a challenging task that cannot be swiftly accomplished, the Government should have a strategic plan on how to reduce dependence on the Russian market in the upcoming years;
• State budget aid should not be given to businesses that contribute to the growing economic dependence on Russia.

Also Read:

• 22/02/2023 – TI Georgia: Georgia’s Economic Dependence on Russia Increased in 2022
• 09/11/2022 – 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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