Georgia: 2013 economic up, down, and stable sectors at a glance - and into 2014

The 6% growth rate predicted for 2013 for Georgia didn’t eventuate but exports rose 14% and some sectors have grown, says the Caucasian Business Week (December 30, 2013).

The increasing sectors

Tourism: This was a success for Georgia in 2013 with the number of visitors increasing by 22% compared to the previous year. A record 5 million visitors in a one-year period added almost USD$800 million in the first six months. The prediction is that this sector will increase in 2014 due to target ad campaigns, construction of infrastructure, and improved services.

Viticulture: Winemaking had a successful 2013 with almost double the exports (96% growth) and revenues exceeding USD$90 million. A total of 45 million bottles of Georgian wines were exported to 48 countries (with a significant return to the Russian market). The 2013 vintage was also one of the most successful over the past few years, making 2014 a likely positive trend.

Energy: The sector attracts 30% direct foreign investment. Investors are looking at alternative energy projects. Electricity tariffs were lowered for consumers in 2013, but corporate tariffs are still a concern for the business sector. The year 2014 looks to be very promising with projects initiated for constructing large hydro power plants, making Georgia a major exporter of hydro energy in the future.

Oil Products: Many companies have entered the oil products import sector which has increased competition. Prices have grown, tariffs are various, and there are less signs of cartel collusion. The market concentration remains high with petrol and diesel consumption shrinking, but gas consumption growing.

The stable sectors

Banking: One new entity entered the market as the sector’s profits tripled, assets grew by 13%, and loan portfolios increased by 12.5%. Deposit growths remained stable. With no major changes in the sector, it is likely to remain stable in 2014.

Transportation: Seaport and automobile carriage volume growth was stable, but there was a downturn in railage due to geopolitical and domestic factors. The Tbilisi Bypass Railway construction continues and the Baku-Tbilisi-Akhalkalaki-Karsi railroad section is being constructed. Air transport reached a record 1.5 million passengers, and new airlines have appeared on the market. Georgia has become a logistics hub which will ensure its stability of the transportation sector.

Pharmaceuticals: The Prime Minister urged sector players to end the monopolistic environment in early 2013. Nevertheless, the market remains stable with three dominating players.

The struggling sectors

Insurance: The sector has faced problems with the construction of regional hospitals and implementation of a state insurance program. With 13 registered insurance companies, the market volume made $234 million to October 2013 which was down 5 times the previous year.

Processing: It remains weak with no new major company on the market in practice, only 7% ratio in total investments, and a slight drop in output.

Agribusiness: The sector grew by 15% on the previous year with farmers selling grapes at desirable tariffs, although citrus sales were down due to bad weather, potatoes had a small harvest, and a major part of the agriculture lands remain uncultivated. The Russian market has opened, but Georgian fruits, tea, citrus and vegetables still have a problem, showing still an issue with commercialization. The sector satisfies only 15% of the domestic market, and access to regional markets remains difficult. Farming technologies are outdated and the sector lacks financial resources. The government has removed the restriction of sales of land plots to foreign citizens and this decision has disoriented the domestic population.

Housing: The housing sector shrunk by 25% with only a small number of private company projects although this has intensified. Real estate tariffs on residential and commercial spaces, as well as on lands, have not changed throughout 2013.

Retail Trade: Serious changes occurred in the retail trade sector, especially in supermarkets and hypermarkets. Some entered and expanded, while others had financial problems. The main expansion for 2014 will be small-size supermarkets. Luxury goods, especially clothing, have re-entered the market.

Overall imports decreased by 2% financially over the previous year. Despite the reduction in amount, oil products remain the number one import product in Georgia (11.9% of total imports), predominantly coming from Turkey. Motor vehicles are the second highest imported product at 9% of total imports. Oil air and gaseous hydrocarbons rank third (4%) and medicines rank fourth (3.5%). This is followed by wheat and cell phones. Turkey is Georgia’s largest trade partner for import, with Ukraine ranking second, and Azerbaijan third.

Exports with the European Union increased by 65% and with the Commonwealth of Independent States (CIS) countries by 29%. Total export was up by 20% financially on the previous year. Motor vehicles remain the number one export product (24.4% of total exports) with Azerbaijan the largest export market. The second largest export product was ferroalloys, with nuts (especially hazel nuts) in third place. Copper ore and concentrates ranked fourth and nitrogenous fertilizer ranked fifth. Wine exports ranked sixth at 4.4% of total exports with mineral water ranking seventh. This is followed by alcohol and spirits in eighth place, raw or semi-raw gold in ninth place, and armature in tenth place. Azerbaijan is Georgia’s largest export market, followed by Armenia, Ukraine, Turkey, Russia, Bulgeria, United States of America, Kazakhstan, Italy, and Canada.