Georgia grew 10% due to the Ukrainian War – 12/12/2022 – World

A war in ukraine brought a spectacular and unexpected economic boom to the former Soviet Republic of Georgia.

The small country south of Russia, with 3.7 million inhabitants, received thousands of Russian immigrants and an unprecedented flow of capital since the conflict began. Before the war, its economy was growing at around 5% a year. Now that growth has skyrocketed to 10.2% in 2022.

“There is a huge increase in the flow of Russian money into the country,” says Iaroslava Babitch, director of the Macroeconomic Policy Research Center at the ISET-PI Institute, at the International School of Economics at Tbilisi State University, capital of Georgia.

The researcher calculates that US$ 1.4 billion (R$ 7.3 billion) entered the country between January and October 2022 – 3.6 times more than in the same period of 2021. On the other hand, Georgia’s currency – the lari– has risen 15% against the dollar since the beginning of the year.

Russian avalanche

Estimates vary, but an estimated 70,000 to 100,000 Russian citizens have migrated to Georgia since the start of the war.

It is very difficult to know the exact number because visitors from countries like Russia, Ukraine or Belarus enter Georgia without having to explain whether they are on vacation or moving to the country.

After entering Georgian territory, migrants can live and work for a year without any inconvenience. And they can also leave the country and re-enter to stay for another year. Thus, thousands of people were able to settle in Georgia without restrictions.

“It’s a very generous migration policy,” according to Babitch, in an interview with BBC News Mundo (the BBC’s Spanish-language service).

Although the flow of Russian citizens has been constant since the beginning of the war, two waves of migration can be identified: the first, in May and another, in September 2022. The latter is related to the rapid departure of men from Russia after President Vladimir Putin announced mandatory conscription for battlefield combat.

This latest wave of Russian immigrants was evident in cities like Tbilisi: long queues to enter banks and high demand for real estate, which drove rent prices to levels never seen before. The situation has generated uneasiness among local residents, who are unable to pay such high amounts.

Russian companies in Georgia

Creating a company in Georgia is very simple for foreigners.

Babitch explains that it is possible to register a company in just two days. This reality is totally different from the bureaucracy that entrepreneurs can find in any other part of the world.

And the number of businesses started by Russian citizens skyrocketed in 2022 — ten times more than the year before. Between January and September alone, Russian citizens registered around 9,500 companies in Georgia, according to the economist.

The vast majority are people who signed up to start their own business, which makes it very difficult to know what their field of activity is. And also rapidly increased the opening of bank accounts of Russian citizens in Georgia.

The risk of the ‘boom turned into a boom’

Georgia is a former Soviet republic that fought a brief war with Russia in 2008🇧🇷 Therefore, its relationship with the neighboring country is complex and some Georgians are afraid of the possible sociopolitical impact of Russian immigration.

Such immigration could become a “boom turned into a boom”, according to Mikheil Kukava, head of socio-economic policy at the Tbilisi-based Institute for the Development of Freedom of Information (IDFI).

The “explosion” refers to the possibility that, in the future, the Russian government will consider an eventual invasion of Georgia, as it did in Ukraine. “If they decide to invade us, the current economic growth could end up becoming a conflict,” says Kukava.

At the moment, unexpected growth has brought strong impacts to Georgia, whose economy is based on agricultural production (grape crops, citrus fruits and nuts), mining (manganese, copper and gold), a small wine industry and in the production of steel and fertilizers.

Located on the border between Eastern Europe and Western Asia, on the Black Sea coast, Georgia has also seen in recent years a increase in tourismwhich is another source of income for the country.

How long can this phenomenon last?

The government expects the current level of growth to slow down in 2023. The International Monetary Fund (IMF) estimates that Georgia’s growth will decline by about 5%, returning to pre-war levels.

The question that remains unanswered is how long these immigrants will remain in Georgia. Those who work remotely are more likely to stay, but the situation is not easy for those looking for face-to-face jobs.

“I don’t expect this economic growth to last for long,” says Babitch. “Anyway, the evolution will depend on what happens with the war.”

She warns that “the inflow of capital is unlikely to turn into long-term investment.” And that it is possible that social tensions will arise, considering the history of conflicts between Georgia and Russia.

In the short term, migration caused an increase in prices which, although temporary, has been affecting citizens with less economic resources in large cities.

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