As war in Ukraine suffocates much of Europe, one country experiences an unexpected economic boom.
Georgia is on track to become one of the fastest growing economies in the world this year.
The impetus for this development came from the massive emigration of more than 100,000 Russians who flocked to Georgia.
“All sectors are doing very well,” said Vakhtang Butskhrikidze, managing director of TBC, Georgia’s largest bank. I mean ranging from small businesses to large corporations, from retail to other sectors. I can’t think of a career that’s going to be a hit this year.”
Immigration statistics show that at least 112,000 Russians immigrated to Georgia this year.
Butskhrikidze said that the new arrivals offer opportunities for Georgia.
“These migrants are very useful because half or maybe the majority of them are very young, tech savvy and knowledgeable. And for us and other Georgian companies, this is this. is a very useful opportunity to use this resource”.
Immigrants also bring large amounts of wealth. In the period from April to September alone, the Russians transferred more than $1 billion to Georgia through banks or wire transfer services.
This is five times the same period in 2021, according to the Central Bank of Georgia.
The inflows helped push the Georgia lari to its strongest level in three years.
The country is expected to record economic growth of up to 10% by 2022.
But not everyone benefits from this growth.
The arrival of tens of thousands of Russians, many of them high-net-worth tech experts, drives up market prices and creates fierce competition with local workers.
Including the education sector and the residential rental market.
According to an analysis by TBC Bank, rents in Tbilisi have increased by 75% this year.
Shio Khetsuriani, CEO of Archi, one of Georgia’s largest real estate developers, said that if rents are high, landlords will have good income, but the profit margin when selling apartments is another matter.
“However, if we look at the price increases in raw materials and labor costs, you can see that the increase in real prices in Georgia is almost equivalent to an increase in the cost of materials. material and labor costs. That means there isn’t too much of an impact when new arrivals drive prices up.”
Georgia’s economic boom has surprised many experts, especially those who have witnessed the ravages of war.
Georgia’s economic wealth is linked to neighboring Russia through exports and tourism.
The two countries share a land border, and Georgia has a liberal immigration policy, allowing foreigners to live, work, and start businesses without having to apply for a visa.
However, economists warn that the boom may not last.
They encouraged the Georgian government to use its plentiful tax revenues to pay off its debts and accumulate foreign exchange reserves while it still could.
Business leaders also expressed concerns that Georgia could face many difficulties when the war ends and the Russians return home.
“They don’t know how long they’re going to stay here now,” said Davit Keshelava, a research fellow at the Center for Macroeconomic Policy Research. But when they go, yes, that’s going to be a problem because some of what’s there in the future won’t be there anymore. It could cause problems with economic growth, particularly hurting the construction, tourism and hospitality sectors.”