Transparency International: Georgia's economic dependence on Russia will continue to grow

“On September 29th Transparency International – Georgia (TI) published a study according to which Georgia’s economic dependence on Russia will continue to grow in 2023.

According to TI, in January-June 2023 Georgia received 2 billion dollars of income from Russia through remittances, tourism and export of goods, which is 1.6 times more than in January-June 2022.

Among the specific findings of the study we should note the following:

• In the first 6 months of 2023, 6,539 Russian companies were registered in Georgia. Since March 2022, 3 times more Russian companies have been registered in Georgia than in 1995-2021;
• 96% of companies registered in 2022-2023 are individual enterprises. This indicates that a part of Russian citizens moved to Georgia to live and do business for a long time;
• 578 thousand visitors came from Russia in January-June 2023, which is 2 times the January-June 2022 figure, but 16% below the pre-pandemic 2019 figure. The share of Russians in the total number of visitors to Georgia is 20%. Before 2022, the share of Russian citizens never reached 20%;
• Some of the Russians have settled in Georgia for a long time. In 2022, there were 62.3 thousand Russian citizens living in Georgia;

• The arrival of Russian migrants in Georgia has led to a significant increase in remittances. In 6 months of 2023, remittances from Russia to Georgia increased by 50% and amounted to 1.1 billion dollars;
• In January-June 2023, exports from Georgia to Russia increased by 34% to $344 million. Russia’s share in Georgia’s total exports amounted to 11.3%, up 1.3 percentage points from January-June 2022. The increase in exports was mainly due to an increase in re-exports of automobiles;
• Georgian wine exports are characterized by high dependence on the Russian market. In the first 6 months of 2023, wine exports to Russia increased by 41% to $82 million. The Russian market accounts for 65% of Georgian wine exports, which is the highest since 2005;
• Imports from Russia increased 31% to 927 million dollars in January-June 2023. The share of imports from Russia in Georgia’s total imports is 12.9%. Russia’s share in imports has not been this high since 2007;

n the first 6 months of 2023, imports of petroleum products from Russia increased the most – by 75%. Compared to the period before the Russian-Ukrainian war, imports of petroleum products increased 5 times;
In January-June 2023, gas imports from Russia increased by 119%, and the share of Russian gas in Georgia’s domestic consumption amounted to 24%, compared to 11.6% in January-June 2022. The share of Russian electricity in Georgia’s domestic consumption amounted to 0.1%, as Georgia did not actually consume imported electricity in January-June;
Foreign direct investment from Russia totaled $108 million in 2022, an annual record. In January-June 2023, investment from Russia increased 7-fold to $56 million, of which $27 million was invested in financial and insurance activities and $18 million in real estate.

• The Georgian economy is increasingly dependent on Russia. Numbers and analysis
• The war in Ukraine one year on, what is has changed in Georgia

As TI explains, the goal of the Georgian government should be to minimize economic dependence on Russia. Last April, the organization released recommendations on what should be done to reduce economic dependence on Russia, which are still relevant today.

TI’s recommendations:
In order to reduce trade with Russia, the Georgian government should start working more actively and more quickly on signing free trade agreements with all strategic partners with whom there is no such agreement yet. Although the real positive effects of such agreements are long-term, based on the current situation, Georgia could be more active in demanding that its strategic partners accelerate the conclusion of a free trade agreement;
Since diversification of the wine export market is difficult and cannot be realized quickly, the government should have a strategy on how to reduce dependence on the Russian market in the coming years;
Aid from the state budget should not be provided to enterprises that increase their economic dependence on Russia. The introduction of the mentioned rule will play an important role in reducing the dependence of the Georgian economy on Russia, which will increase Georgia’s economic and political security.