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When We Turn Crises Into Opportunities. Georgia Grows by 10% Despite the War

The conflict taking place in Ukraine, due to the Russian invasion, has brought multiple problems, not only for the aforementioned country but for others in the rest of Europe. However, the neighboring nation of Georgia is growing by 10%, despite the war. Here are the details.

Some facts about Georgia

Georgia was one of the republics that were part of the now-defunct Soviet Union, along with the two nations involved in the conflict (Russia and Ukraine) and others: Lithuania, Latvia, Estonia, Armenia, Belarus, etc.

This small country, whose capital is Tbilisi, measures just under 70,000 square kilometers and has about 4 million inhabitants, however, the latter figure may have varied a little due to migrations as a result of the war, as we will see later.

Georgia is located between two continents: Europe and Asia. It has borders with Ukraine, Russia, Turkey and Armenia. and has an exit to the Black Sea, which is considered a strategic position

Its economy depends on some mining products (manganese and copper, mainly), crops (citrus fruits, tea and grapes) and small industries. Tourism is its forte, as it receives up to 5 million visitors per year.

As for their needs, it can be said that their energy production is low, importing natural gas and oil; their only significant source is hydropower. It also has good development possibilities in maritime transport; but it has certain problems with smuggling, according to a report by UNICRI

The GDP of Georgia was estimated at 18,700 million USD for the year 2021. Although it has increased markedly, up to 10%, since the invasion of Ukraine began. Let’s see why.

Why is Georgia growing by 10%, despite the war?

A good part of Europe has been affected, in one way or another, by the current armed conflict, both due to the interrupted supply of Russian gas and oil, and due to the decline in Ukrainian agricultural products: sunflower, corn, wheat, barley and other cereals.

However, there are those who have benefited, such as Georgia, which is growing by 10%, despite the war, as noted, turning the crisis into opportunity. And while it is true that, after the implementation of strong policies to combat problems such as tax evasion, this country was getting better, its annual growth was still 5%.

Now well, since the beginning of hostilities, the currency of Georgia, the lari, showed a sharp increase, going from 3.4 per USD in March to 2.6, which was the price with which it closed in the year 2022.

The jump in the economy experienced by the small country on the shores of the Black Sea is due, among other things, that they received an unprecedented wave of Russian immigrants, which in turn has meant an increase in capital flow.

It is thought that about 100,000 Russian citizens may have migrated to Georgia. And although the displacement had been constant throughout the war, there was an uptick recently, after President Putin announced mandatory conscription.

Of course, it doesn’t necessarily mean that everyone is going to stay. The country’s policies in this regard are flexible and do not require the person to explain whether he is coming on vacation or is going to stay. In fact, you can live and work for a year, without requiring major legal procedures.

The important thing is that, according to experts from the Research Center on Macroeconomic Policies of Tbilisi State University, it is estimated that this migration has meant an injection that reaches 1,400 million USD, only in the first ten months of 2022.

In the same order of ideas, it is pointed out that there are already many Russian citizens registering companies: about 9,500 signatures in the first nine months of 2022, which is 10 times more than throughout 2021. 

The good and the bad

As with the great migratory movements, everything has been turned upside down, in this case for the good of some. For example, in the capital Tbilisi, the high demand for rental properties has raised prices, which is profitable for the owners, but not so much for the natives of the country.

And this is something that is not only observed in real estate. In this regard, according to the figures of the International Monetary Fund, the accumulated annual inflation in Georgia for the month of November 2022 was 10.1%.

On the other hand, it could be a passing boom, and the current growth will slow down in the year 2023, which has just begun. In fact, in the IMF projections, it is estimated that Georgia’s growth will again be close to its usual pre-war level, which was 5%.

Another doubt that persists is that all those investments and companies could perhaps be from swallow capitals. In this order of ideas, it is not known how long the immigrants will stay or what would happen if there is a mass return of them. 

Additionally, there are still some fears related not only to the economic, but to the social and political, but that can definitely have an impact on the citizens’ pocket.

For example, it is thought that social tensions may appear, given the previous conflicts with Russia. In such a sense, it is not ruled out that some outbreaks of xenophobia may also arise.

Also, some people are afraid that all this may provoke some kind of retaliation from the giant Russia, with whom Georgia already had an armed confrontation in 2008, because of the regions of Abkhazia and South Ossetia.For the time being, Georgia has managed to turn crises into opportunities, enjoying an early spring, since the good winds that come from its great northern neighbor are still blowing. Winds that translate into a few investments that have breathed great dynamism into the economy of the small Eurasian country.

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