Georgian Economic Outlook
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Georgian Economic Outlook Ministry of Economic Development of Georgia Country Overview Area: 69 700 sq km Population 2008 E: 4 630 841 Life expectancy: 76.51 years Official language: Georgian Literacy: 100% Capital: Tbilisi Currency (code): Lari (GEL) GDP 2008E: US$ 12.80 billion GDP - real growth rate 2008E: 2.1% GDP - Per Capita 2008 US$ 2 920.3 Inflation rate 2008 (average annual): 10.0% External debt to GDP 2008: 21.4% Ministry of Economic Development of Georgia Liberal Reforms for Long Term Sustainable Growth • Liberal Tax Code Only 6 taxes left Significant procedural and institutional reforms Simplified system of tax disputes discussion • Customs Reform Simplified customs procedures Simplified and sharply reduced the costs connected to the foreign trade Number of import tariffs were abolished on approximetaly 90% of products 3 tariff rates (0%, 5%, 12%) remained No quantitative restrictions (quotas) on imports and exports • Modernized system of Licenses and Permits Number of licenses and permits reduced by 84% Licenses and permits are only used in the production of highly risky goods and services, usage of natural resources and other specific activities Significantly simplified procedures of issuing licenses and permits Introduced “one-stop shop” and “silence is consent” principles Ministry of Economic Development of Georgia Liberal Reforms for Long Term Sustainable Growth • The reform of Technical Regulation System National mandatory standards system was replaced by the voluntary standards, giving entrepreneurs the possibility: – To select the standard for his activities registered in the country – To use the standard of any country or any regional or international standard – To register standards in Georgian National Agency for Standards, Technical Regulations and Metrology and to use them for entrepreneurial activities – To elaborate own standard for new goods, register it in the national agency and use it in entrepreneurial activity – To obtain consultations for the selection and elaboration of standards Declined role of state in the system of technical regulation • Liberal Labor Code – one of the most liberal in the world Simplified relations between employers and employees Significantly reduced hiring and firing expenses Ministry of Economic Development of Georgia Economic Growth Nominal and Real GDP Nominal GDP Per Capita 3500 31.3 35 29.2 26.2 3000 30 15.0 12.3 15 24.9 11.1 2500 25 9.6 9.4 18.2 18.9 10.0 10 2000 20 % 5.9 % 1500 2 920.3 15 USD 2 314.6 bln. USD bln. 5.0 5 1000 1 763.5 10 2.1 1 483.5 1 187.6 500 919 5 4.0 5.1 6.4 7.8 10.2 12.8 0.0 0 0 0 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Nominal GDP real GDP Per Capita Growth % GDP growth Components of Nominal GDP 2008 Year 2008 Trade 13.9 Fastest growing sectors of Georgian Economy Agriculture 8.9 • Mining and Quarrying – 17.0% Other 53.0 Manufacturing 8.2 • Communications – 14.5% • Education – 13.7% Transport 6.6 • Trade and repair services – 10.4% Construction Health care 5.3 • Health care and social security – 5.9% 4.1 Ministry of Economic Development of Georgia Consumer Price Index Consumer Price Index 2008 • End of period Inflation – 5.5% • Average annual Inflation – 10% Consumer Price Index Trend 11.0 12 10.0 12 9.2 10 8.2 10 7.0 7.5 8 8 5.6 % 9.2 % 8.8 6 6 6.2 4 5.4 5.7 5.5 4 4.8 2 2 0 0 2002 2003 2004 2005 2006 2007 2008 Average Annual End of Period Ministry of Economic Development of Georgia Labour Market Unemployment Rate % • Challenge: structural unemployment/job mismatch 20 18 13.8 13.6 • Response: State Programs: 12.6 13.3 16 Vocational Training and Retraining, Development of 14 11.5 12 Professional Training Infrastructure “Professional % 10 8 Education for Employment” (PPP format) 6 “Cheap Credit”, “100 new Agro Industry 4 2 Enterprises” 0 2003 2004 2005 2006 2007 Monthly Salary of Employed in State and Non-state Enterprises • Unemployment rate declined to 13.3% in 2007, down 0.3% y-o-y 500 • Employed population – 1 678.7 thousand, among 442 400 which: 307 306 300 265 Salaried employees – 625.4 thousand (+3.5% 212 194 200 165 141 138 158 07/’06) GEL 100 • Accelerated growth rate of the number of salaried 0 employed and decrease of the number of self- 2003 2004 2005 2006 2007 employed State Sector Private Sector Ministry of Economic Development of Georgia Poverty Level Subsistence Level 2004-2008 Subsistence Minimum 140 127.9 • Subsistence Level has increased by 118.6 120 106.5 95.8 51.7% 100 84.3 80 GEL 60 Poverty Level 2004-2008 40 20 0 • Poverty Level has declined by 2.5 2004 2005 2006 2007 2008 point Poverty Level • Poverty depth has declined by 1.1 30 24.6 24.1 23.3 point 25 21.3 22.1 20 • Poverty Severity has declined by 0.8 % 15 10 8.1 7.6 7.2 6.9 7.0 point 4.0 3.6 5 3.3 3.2 3.2 0 2004 2005 2006 2007 2008 Level Depth Severity Ministry of Economic Development of Georgia Foreign Trade Foreign Trade 2008 Foreign Trade Turnover 2003-2008 • Total trade turnover – 7 555.8 mln. USD 56.3 8 45.5 60 39.1 (17.2% increase) 6 36.0 35.3 40 Export – 1 497.7 mln. USD (21.5% increase) 7.5 4 % 6.4 20 Import – 6 058.1 mln. USD (16.2% increase) USD bln. 2 4.6 17.2 1.6 2.5 3.4 In 2004-2008 Georgian trade turnover 0 0 2003 2004 2005 2006 2007 2008 increased by 203.2% Foreign Trade Turnover Growth Export, Import, Trade Deficit 10 Main Trade Partners 2008 8 45 1200 39.0 35.6 1050 35.7 6 5.21 900 6.06 25.5 3.70 30 750 4 23.5 2.50 600 1.85 USD mln. 12.9 17.4 1.49 450 2 1.14 0.93 1.24 0.79 0.46 0.87 300 0.35 0.65 15 % 0 150 bln. USD bln. 2002 2003 2004 2005 2006 2007 2008 0 -2 -0.44 -0.68 -1.20 -1.63 0 -2.77 -4 -3.97 -4.57 Turnover Export Import -6 -15 Export Import Trade Deficit Deficit/GDP (%) Source: Department of Statistics Ministry of Economic Development of Georgia Foreign Trade Foreign Trade With Country Groups 2008 • Foreign trade turnover with EU – • Foreign trade turnover with CIS – 2000.5 mln. USD (10.7% increase) 2542.9 mln. USD (9.9% increase) Export – 335.2 mln. USD (24.8% Export – 542.5 mln. USD increase) (17.4% increase) Import – 1665.3 mln. USD (8.2% Import – 2000.5 mln. USD (8% increase) increase) 3000 2 543 2500 2 314.3 2 000.5 2000 1 792.4 1 807.4 1500 1 404 mln. USD mln. 982.5 1 105.7 1000 792.6 715.8 594.9 491 500 0 2003 2004 2005 2006 2007 2008 CIS EU Source: Department of Statistics of Georgia Ministry of Economic Development of Georgia Diversified Trade Structure Export structure by country 2008 Import structure by country 2008 Other 19.5 Turkey 17.6 Turkey 15.5 Other 30.8 France 2.7 Ukraine 10.9 UK 2.9 Azerbaijan 13.7 Mexico 3.5 Turkmenistan 2.2 Azerbaijan USA 6.8 10.0 Italy 3.0 Ukraine 9.0 USA 4.0 Germany 7.2 Bulgaria 7.2 UAE 4.5 China 4.9 Russia 7.0 Armenia 8.3 Canada 8.8 Export structure by product 2008 Import structure by product 2008 Oil and oil Ferro-alloys products 12.6 17.8 Oil gases 3.4 Pharmaceuticals 3.1 Bars and roads Scrap metals 1.8 Other 44.2 8.6 Wheat 1.8 Flour 1.2 Manganese ores Ores 7.9 1.2 Other 74.9 Fertilizers 7 Wines 2.5 Gold 6.7 Cement 5.3 Source: Department of Statistics of Georgia Ministry of Economic Development of Georgia Trade Policy Competitive Trade Regimes • Free Trade Regime – with CIS countries and Turkey (since November 1, 2008) • Most Favored Nation Regime (MFN) – with World Trade Organization (WTO) member countries • Preferential Regime (GSP) – with USA, Canada, Japan, Switzerland, Norway • Preferential Regime (GSP+) – with EU (7200 items) since 2005 Possibility of FTA with EU in nearest future Main Features of Georgian Trade Policy • Low import tariffs (90% of goods free from import tariff) • Few export/import licenses and permits • No quantitative restrictions on import and export • No customs tariff on export and re-export • No VAT on export • Simplified export and import procedures Export Promotion Department was established for export facilitation Ministry of Economic Development of Georgia Foreign Direct Investment Year 2008 FDI inflows 2500 25 19.8 • FDI – 1 564 mln. USD 2000 20 15.3 1500 12.2 15 • Reduction – 22.4% 9.7 8.5 % 1000 7.0 2014.8 10 • Share of FDI in GDP – 12.2% 1564.0 mln.USD 500 1190.4 5 340.1 499.1 449.8 Growth in 2003-2008 – 360% 0 0 2003 2004 2005 2006 2007 2008 Growth in 2003-2007 – 492.4% FDI FDI to GDP Pipeline and Non-Pipeline Investments FDI breakdown by origin 2006 2007 2008 UK 15.7% Netherlands 14.9% United Arab Emirates 19.6% 1200 USA 15.3% Czech Republic 11.3% USA 10.7% 973,9 Kazakhstan 12.8% Virgin Islands 9.3% Turkey 10.5% 1000 884 Turkey 10.9% Denmark 7.8% Virgin Islands 10.0% 800 Azerbaijan 6.5% Cyprus 7.4% UK 9.5% 600 Norway 6.5% UK 7.2% Netherlands 8.7% 360 306 Virgin Islands 4.9% UAE 6.5% Switzerland 5.8% 400 231 265 139 185 Italy 4.0% Turkey 4.7% Kazakhstan 4.2% 61 107 109 89,5 200 Denmark 3.6% Russia 4.4% Austria 3.3% mln.