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TI-Georgia: Georgia’s economic dependence on Russia has increased in 2022

February 22 by the non-governmental organization Transparency International Georgia, in 2022, compared to the previous year, Georgia’s economic dependence on Russia has increased, which is “mainly due to the jump in remittances”.

“The growth of economic dependence on Russia is dangerous for Georgia, since Russia traditionally uses economic relations as a lever of political pressure on independent countries,” the report says, while also focusing on threats from a macroeconomic point of view.

International trade
According to the study, in 2022, compared to the previous year, exports to Russia increased by 6.8% to $652 million, while imports increased by 79% to $1.8 billion. “The share of Russia in Georgia’s total exports amounted to 11.7%, which is 2.7 percentage points less than in 2021. In terms of imports, the share of products imported from Russia in Georgia’s total imports increased from 10.1% to 13.6%, “which is the highest figure in the last 17 years.”

“As a result, in 2022, the share of trade with Russia in the total trade turnover of Georgia increased from 11.4% to 13.1%, which is the highest value over the past 16 years.”

According to the report, “Traditionally, the export of Georgian wines is highly dependent on the Russian market”, and last year the share of the Russian market in the total export of Georgian wines increased to 63.8%, “which is the highest figure since 2013, after the return of the Georgian wines to the Russian market. In 2022, wines worth $161 million were sold on the Russian market. Then followed – ferroalloys for 109 million US dollars; soft drinks – $90 million; cars – $76 million.

As for imports from Russia, oil products took the first place – 623 million US dollars. Then came wheat and wheat flour – $128 million, natural gases – $112 million, coal and coke – $78 million.

Tourism and remittances
Speaking about the growth rate of visitors from Russia to Georgia, the report compares data from 2022 and 2019, as they have “drastically decreased” in 2020-2021 due to the Covid pandemic.

According to the report, 1.1 million visitors came from Russia in 2022, which is 26% less than the number of visitors from Russia in 2019. However, the number of visitors from Russia in September-December 2022 exceeded the figure for September-December 2019 by 14%. “The increase observed since September may be to some extent related to the military mobilization announced in Russia on September 21.”

In addition, the share of Russian visitors in the total number of those who visited Georgia in 2022 was 20%, which is 4.3 percentage points higher than in 2019 and almost 2 times more than in 2021. “(Since 2011) the share of Russian citizens among those who come to Georgia has not yet reached 20%.”

Based on data from the National Bank of Georgia, the report states that Russian visitors spent $891 million in Georgia last year, which is 15% more than in 2019 and 5 times more than in 2021.

“In 2022, the share of income received from Russian visitors in the total income received from visitors to Georgia amounted to 25.3%. For reference, the same indicator reached its highest level – 26.3% in 2018.”

In terms of remittances, the report says that a total of $2.1 billion was sent from Russia last year, which is 5 times the figure for 2021. It should be noted that money transfers from Russia have increased significantly since the beginning of the war in Ukraine, and if in January-March 2022 an average of 24 million US dollars was transferred per month, then in April 133 million US dollars were transferred, and in May – 314 million US dollars. USA.

“The share of remittances from Russia in the total volume of remittances received by Georgia increased to 47.3%. The last such high figure was in 2014.”

Direct foreign investments
According to Transparency International, in January-September 2022 (data for the 4th quarter are not yet known), Russia received foreign direct investment in the amount of $33 million, which is 51% less than in January-September of the previous year.

The report, citing information from the BMG publication, states that in the 3rd quarter of 2022, $ 29 million of investments from Russia were invested in the real estate sector.

Russian companies
According to the report, up to 15 thousand Russian companies were registered in Georgia in 2022, which is 16 times higher than in 2021. “In total, 22,400 Russian companies are registered in Georgia, and 66% of them were registered after the start of the war in Ukraine.”

“95% of the companies registered last year are sole proprietorships. This indicates that some Russian citizens moved to Georgia for a long time to live and do business.”

In order to reduce economic dependence on Russia, Transparency International Georgia believes that:

we should start working more actively and faster on signing free trade agreements with all strategic partners with whom we do not yet have such an agreement.
subsidies from the state budget (grants, concessional loans, etc.) should not be provided to enterprises that increase their economic dependence on Russia.
the establishment of companies in Georgia by Russian citizens must be carried out in a regime different from the one in force in Georgia

source: civil