With tens of thousands of Russians arriving in Georgia since the start of the war in Ukraine, data suggests the economy is booming: GDP has risen by double digits, the currency is at its strongest in years and remittance funds are pouring in.
But many Georgians need to see more benefit as the most noticeable economic change has been rising inflation and many Georgians need to welcome the newcomers even more.
Nine months after the start of the war, the large number of Russian emigrants in the large cities of Georgia and their economic contribution cannot be overlooked. At the exchange offices, the Georgian lari is getting stronger; it now trades at about 2.7 to the dollar, compared to a relatively stable pre-war rate of 3.1. Russian-speakers tend to outperform locals in restaurants and cafes, too, from chic city-centre establishments to more modest ones on the outskirts.
The newcomers “spend money on our economy, if they consume something, of course, it means stimulating the economy,” Economy Minister Levan Davitashvili said said Parliament in October.
The first wave of migrants arrived from Russia immediate result February’s invasion, fleeing heavy sanctions and a crackdown on critics. Then, in the summer, Georgia saw an unusually high number of Russian vacationers, with the August numbers surpassing even the pre-pandemic totals. And until the end of September Georgia still saw another big wave of migrants, this time men of military age, fleeing Russia’s mobilization call.
The total number of those who came from Russia and stayed in Georgia since the start of the war has been the subject of speculation, but government officials put it at less than 100,000 – or almost 3 percent of the country’s population.
Since Georgia’s immigration policy allows Russian citizens to stay in the country for a year without a visa, it is difficult to distinguish figures for migrants from tourists. And with the country enjoying an overall tourism revival in the wake of the pandemic, examining the economic impact of the Russian influx has been a challenge.
The National Bank of Georgia described the phenomenon as a “war effect” and performed its own calculations in October. estimate the total number of Russian and Belarusian citizens recovered from the war is between 80,000 and 90,000. The bank predicts that these people will contribute an additional $500 million to the Georgian economy this year, about 15 percent of all “travel-related revenue,” or monies linked to migration and tourism.
Several other studies confirm the significant impact of the new migrants on the Georgian economy.
analyze data From the outbreak of war to the end of August, according to the Institute for Development of Freedom of Information, a Georgian think tank, more than 45,000 Russian citizens have opened new accounts in Georgian banks, while deposits by Russian citizens have nearly tripled compared to pre-war amounts, which increased by about 1.2 billion lari (about 445 million US dollars).
in the another study In November, Transparency International Georgia, a corruption watchdog, said 9,500 new Russian companies (the vast majority of them sole traders, a business model typically used by individual freelancers) were registered in Georgia from March to September, 10 times the total of 2021 . transfers from Russia quintupled to $1.1 billion between April and September.
And these studies didn’t take into account the latest wave of arrivals, which began mobilizing in September, meaning the real impact is even greater.
But the war also came as Georgia was already enjoying a rapid economic recovery from the recession caused by the pandemic, posting GDP growth of up to 18 percent year-on-year in January. And the influx of Russians is just one of the economic effects of the war; another is an increase in revenue from it increasing transit demand as international shippers try to avoid traditional routes through Russia.
Whatever the cause, growth forecasts have skyrocketed: the International Monetary Fund had projected 5.4 percent GDP growth for Georgia in 2022 and then immediately after the invasion forecasts this growth could drop to as little as 3 percent. But now the fund projects 10 percent growth for the year.
“Georgia’s economy has performed strongly in 2022 as negative impacts from the war in Ukraine so far have generally been less than previously expected,” said James John, an IMF official. said after a visit to Tbilisi in early November. “Jumping tourism revenues, a war-induced surge in immigration and financial inflows, and a surge in transit trade through Georgia follow a robust recovery from the pandemic.”
But the robust growth numbers have been outpaced by inflation, which the IMF projects will reach 10.5 percent in 2022.
And for many Georgians, that’s the number that makes the economic picture look less rosy than economists and the government are describing. Along with inflation, the influx of Russians has led to this dramatic rent increases.
A recently opinion poll by the International Republican Institute found that 71 percent of respondents believed the country’s economy had deteriorated over the past year. Economic problems, including unemployment and rising cost of living, continued to top the list of Georgians’ top concerns.
The poll also showed that Georgians are largely opposed to the influx of Russians, with 78 percent opposed to Russian citizens entering Georgia without a visa, registering a business or buying a property.
But aside from differing views on the impact of the influx, economists also agree on how long the impact will be.
“This is probably just a one-off effect and much will depend on Russia’s economic situation going forward,” said Lyaziza Sabyrova, an official at the Asian Development Bank. told reporters on September 29th. Sabyrova said the impact of the second wave of migrants, which presented a different demographic profile, has yet to be studied.
Otar Nadaraia, chief economist at Georgia’s TBC bank, believes the impact could last longer.
“I don’t think this is just a short-term effect, even in the scenario where the geopolitical situation returns to where it used to be, I think a large number of migrants will remain in Georgia in the long-term,” he said said Business Media Georgia End of September.
Nadaraia said migration is now concentrated in two Georgian cities, Tbilisi and Batumi, and that other parts of the country must also develop for healthier growth.
“With such an approach, there is a good chance that we will face a larger influx not only from Russia but also from other countries, which will ultimately help reduce the exodus of our population from these economically weak areas,” he said.
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