In 2023, Georgia's economic dependence on Russia decreased but still exceeds pre-2021 levels

A Transparency International-Georgia (TI) report shows that in 2023, Georgia’s economic dependence on Russia was lower than in 2022 but significantly higher than in 2021, mainly due to a decrease in remittance volume.

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Key findings from TI:

• In 2023, Russian citizens registered 11,552 companies in Georgia, marking a 3.6-fold increase compared to 1995-2021 and 26,339 since the start of the Ukraine war.
• 96% of the companies registered in 2022-2023 are individual entrepreneurs, indicating a trend of Russian citizens relocating to Georgia for long-term residence and business.
• There were 1.4 million visitors from Russia to Georgia in 2023, a 30% increase from 2022 and a slight decrease compared to pre-pandemic levels.
• Around 62,300 Russian citizens remained living in Georgia in 2022, according to local statistics.
• $1.5 billion was transferred from Russia to Georgia in 2023, a 26% decrease from 2022 but a significant increase compared to 2021, driven by Russian migrants settling in Georgia.
• Georgian exports to Russia increased by 2.3% in 2023, totaling $657 million, with Russia accounting for 10.8% of total exports, a slight decrease from 2022.
• The export of Georgian wine remains highly dependent on the Russian market, with a 5% increase in wine exports to Russia in 2023, reaching $168 million, representing 65% of total Georgian wine exports, the highest since 2005.

• In 2023, imports from Russia to Georgia declined by 5% to $1.7 billion. However, this marked a significant 71% increase from 2021. Russia’s share in Georgia’s total imports decreased to 11.3%, down 2.2% from 2022.
• Imports of petroleum products from Russia saw the largest decline, down $70 million (11%). Nevertheless, compared to 2021, imports of petroleum products quadrupled. Imports of wheat and wheat flour decreased by $36 million (28%).

Recommendations:

TI assesses economic dependence on Russia as a threat to Georgia, highlighting Russia’s historical use of economic ties for political leverage. Therefore, the Georgian government’s goal should be to minimize this dependence.

To achieve this, TI recommends that the Georgian government actively pursue free trade agreements with strategic partners lacking such agreements to reduce trade reliance on Russia.

Given the slow process of diversifying the wine export market, the Georgian government needs a long-term strategy to decrease reliance on the Russian market.

TI also suggests that state budget assistance should not support businesses that increase economic dependence on Russia.

According to the report, these measures will significantly reduce the Georgian economy’s reliance on Russia, enhancing Georgia’s economic and political security.