Coronavirus deals a blow to the Georgian economy

The coronavirus is dealing two serious blows to Georgia:

1. Global economic problems will cause a reduction in external revenue to Georgia.

2. Confirmated coronavirus cases in Georgia will cause a decrease in the influx of tourists, which in turn may result in the national currency depreciating.

The impact of the coronavirus on the global economy

The country hit the hardest was China, which makes up 16% of the global economy.  Because of the fact that all world economies are, to some extent, connected to the Chinese economy–whether it is exports, imports or tourism–they will also suffer the damages.

• How did Georgia meet the first case of coronavirus? The reaction of the gov’t and public

Oxford Economics reports that the coronavirus has set back the global economy by 1.3%, and the total global losses for 2020 will exceed a trillion dollars.

•Over the past month, indices of the world’s leading stock exchanges fell by more than 10% and continue to decline. Stock owners have already lost up to $2 trillion. The Russian stock exchange fell by 9%;

•The global oil price has decreased by 27%, causing significant damage to the economies of oil exporting countries;

•The leading countries in the tourism sector forecast a 20-30% reduction in tourism;

•Chinese export and import rates continue to fall, which is throwing many global economies with ties to the Chinese economy into disarray.

Global problems will undoubtedly affect Georgia

Georgia has a small open economy which is highly dependent on external factors. The current global situation in light of the outbreak of coronavirus would certainly negatively affect Georgia, even if there were no confirmed cases of the disease in the country.

•Demand for Georgian products will decrease, therefore, the volume of exports will decrease.

•Tourism will decrease – in the current travel climate, some people will prefer to stay home and save money.

•The volume of external investments will decrease, as governments will reduce the volume of exported capital.

•Financial inflow from emigrants will decrease, as their earnings will be reduced, and this comprises a significant portion of Georgian fiscal revenue.

Georgia expected economic growth of 4.5% in 2020. Given the aforementioned factors, achieving this goal will be incredibly difficult.

Coronavirus deals direct blow to Georgian economy

Reports on the first confirmed case of coronavirus in Georgia will definitely worsen the economic situation, which was, overall, looking optimistic.

Most of the metrics for 2020 have far exceeded the metrics from the same time last year

In particular:

•Exports are up 10%,

•The number of tourists rose by 19%,

•The volume of money sent back by emigrants is up by 9%,

•The lari became stronger, dropping from 2.87 to 2.79 GEL to 1 USD

Coronavirus has already caused the lari to depreciate by 1.1 points, and experts say this is only the beginning, as the population is rushing to buy food, not currency.

The tourism sector will suffer serious losses

Some will refuse to come to Georgia due to the presence of coronavirus, while others will not have money to travel. Revenues will decrease due to the fact that the economy of the entire country will weaken.

Many people simply will not be able to enter Georgia because of the bans, which apply to citizens of China and Iran, but may be extended to include other countries.

It is worth noting that tourists from these two countries spent about $190 million in Georgia last year.

However, the active tourist season in Georgia begins in May, and the situation may improve by then.

In 2019, the Georgian tourism sector earned about $3.5 billion, while the entire economy is $18 billion.

The fate of the lari

The exchange rate of the national currency is largely associated with the number of tourists. If this number decreases, then we should expect the lari to depreciate.

Experts today say that the country was lucky that the spread of coronavirus coincided with the strengthening of the lari, which means that the fall it suffers will not be as significant as it could have been.

Another encouraging factor is that the tourist season has not really started yet. But if the world is unable to stop the spread of coronavirus before autumn, the results will be disastrous.