01 Georgian Economic Outlook November, 2015
Country Overview Area 69 700 sq km Resilient Economy Population 3,7 mln Proved by Sovereign Credit Ratings Life expectancy 72.9 years Official language Georgian Literacy 100% Currency Lari (GEL) BB- Stable GDP: 2014* US$ 16.5 billion GDP - real growth rate 2014 4.6% BB- Stable GDP - Per Capita 2014 US$ 4,426.3* Inflation rate 2014 3.1%; 2.0% (average annual; e-o-p) Public External debt to GDP 2014 26.8% Ba3 Positive * Source: GeoStat & MoESD calculation (according to Census, 1 st January 2015 ) MoESD
Georgia in International Ratings Index of Economic Freedom, 2015 Heritage Doing Business, 2016 Hong Kong 1 89.6 free Singapure 2 89.4 Singapure 1 (100-80) New Zealand 3 82.1 New Zealand 2 Estonia 8 76.8 Denmark 3 mostly free Lithuania 15 74.7 Estonia 16 (79.9-70) Georgia 22 73.0 Up from Lithuania 20 Latvia 37 69.7 #112 in 2005 Latvia 22 Armenia 52 67.1 moderately Georgia 24 Turkey 70 63.2 free Armenia 35 Azerbaijan 85 61.0 (69.9-60) Russia 51 Moldova 111 57.5 mostly unfree Turkey 55 Russia 143 52.1 (59.9-50) Azerbaijan 63 Belarus 153 49.8 repressed Ukraine 83 Up from Ukraine 162 46.9 (49.9-0) Georgia /2006 112 #99 in 2005 World Economic Freedom, 2015 Fraser “Globally , Georgia improved the most in the areas measured by Doing Business over the past 12 years” Hong Kong 1 “Georgia made improvements in all 10 areas included in the aggregate distance to Singapore 2 frontier score, through 39 regulatory reforms” New Zealand 3 Up from “Georgia stands out in Europe and Central Asia for having made Georgia 12 #62 in 2003 Lithuania 19 big strides toward better and more efficient business regulation” Estonia 22 Latvia 35 Source: WB Latvia 71 Turkey 82 Russia 99 Moldova 103 Azerbaijan 118 Significantly improved position in Property Rights Ukraine 128 MoESD
Corruption Free Government & Good Governance Global Corruption Barometer 2013 World Governance Indicators 2014 Free Industrial Zones “P roduce in Georgia ” Singapore 100.0 Denmark 1% Estonia 93.3 Norway 3% USA 88.5 Georgia 4% Czech Rep. 81.3 % admitting having paid a bribe UK 5% Georgia 79.3 up 5.6p y/y Hungary 74.5 Estonia 6% Italy 72.6 Romania 7% Romania 71.6 USA 7% Bulgaria 71.2 Bulgaria 8% Turkey 66.3 Czech Rep 15% Albania 60.6 Armenia 18% Armenia 60.1 Latvia 19% Serbia 56.3 Turkey 21% Moldova 53.8 Greece 22% Bosnia & Herz. 49.5 Lithuania 26% Kazakhstan 44.7 Ahead of 10 EU Azerbaijan 43.8 Serbia 26% member countries Russia 36.5 Kazakhstan 32% Source: WB Ukraine 28.8 Ukraine 37% Georgia improved ranking in all 2014 WGI Voice & accountability - up 1.2p y/y to 55.7 70% of surveyed thinks that corruption has been Political stability - up 3.7p y/y to 35.9 decreased Government effectiveness - up 2.2p y/y to 71.6 Regulatory quality - up 5.6p y/y to 79.3 Rule of law - up 10.8p y/y to 64.4 Source: Transparency International Control of corruption - up 9.5p y/y to 75.5 MoESD
Simple, Low, Efficient and Fair Tax System 03 Tax Misery & Reform Index 2009, Forbes - 4 th Least Tax Burden Country in the World Number of Taxes 6 Flat decreased form 21 VAT 18% Personal Income Tax 20% Property Tax Up to 1% Import 0%, 5%, 12% Corporate Profit Tax 15% Excise Varies Dividend and Interest Tax 5% Double Taxation Avoidance Treaties with 49 countries • Foreign source income of individuals fully exempted • Payroll Tax • Accelerated depreciation on capital assets No • Social insurance Tax • Loss carry forward for corporate profit Tax purposes (10 years) • Capital gains Tax • No restrictions on currency convertibility or repatriation of capital &profit • Wealth Tax • Double Taxation avoidance treaties with 47 countries MoESD
Growing & Diversified Economy Nominal GDP and Real Growth Growing GDP Per Capita 5000 4,426 4500 20 ,3523 3,600 4000 12.6% 16.5 16.1 15.8 3,231 9.4% 14.4 3500 2,921 15 12.8 2,455 2,623 3000 11.6 2,315 US$ billion 6.4% US$ 10.8 4.6% 10.2 2500 1,764 7.2% 2.6% 10 7.8 2000 6.2% 1500 3.3% 1000 5 -3.7% 500 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2006 2007 2008 2009 2010 2011 2012 2013 2014* Nominal GDP GDP real growth Average real GDP growth (2003-2014) Diversified Economy GDP 2014* 6.3% other, 22.9% 7% 7% Trade, 17.5% 6% 6% 4.8% 5% 5% 3.3% 3.6% 4.0% 4.1% 4.1% 4% 4% 2.5% 2.6% 3% 3% Industry, 16.9% 1.3% 2% 2% Healthcare, 6.0% 1% 1% 0% 0% Transport & Hungary Ukraine Czech Republic Estonia Latvia Poland Lithuania Russia Turkey Georgia Construction, 7.1% Communication, 10.4% Public Agriculture, 9.3% Administration, 9.9% Top performer in the region Source: GeoStat Source: IMF, GeoStat MoESD
Foreign Direct Investment FDI inflows In 2014, FDI to Georgia amounted to 1,758.4 mln USD which is not 2500 25 19.8 only 86,7% increase compared to 2013, but also the highest yearly 2000 20 15.3 indicator over the last 6 years . US$ million 12.2 1500 15 10.6 % 7.7 FDI Share in GDP – up from 6.1% to 10.6% in 2014 1000 7.0 7.0 10 6.1 5.8 5.8 500 5 450 1,190 2,015 1,564 658 814 1,117 912 942 1,758 Georgia 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* has Bilateral Investment Treaties (BI T’s) with the 29 countries FDI share in GDP (%) (negotiations launched with 2 countries) • is member of ICSID Convention (since 1992) FDI Breakdown by Sectors 2014 Largest Investor Countries 2014* Transport and Communication Netherlands 21% Construction 2% 11% 19% Azerbaijan 25% Manufactuing 6% China 12% Energy sector 7% USA 10% Real estate 8% 18% Luxemburg 6% Financial sector 11% Mining United Kingdom 6% 12% Hotels and restaurants Russian Federation 5% Other sectors Source: GeoStat MoESD
Liberal Trade Regimes 56 FTA with China – negotiations will FTA with EFTA – ongoing negotiations EU start in nearest future Duty Free access to additional 14 mln market Duty Free access to 500 mln Access to additional 1.5 bln market DCFTA market Access to ~ 900 Million market without duty Since September 2014 FTA CIS US, Canada, Japan, GSP Norway, Switzerland Simple, transparent & business oriented customs T urkey 0% of customs duties over 80% of imports FTA procedures 0% customs duty on export Efficient tax administration 0% of VAT on export No quantitative restrictions and tariff barriers Maximum customs duty on imports – 5-12% Average Customs Clearance ~ 15 minutes Most Favored Nation (MFN) since 2000 MoESD
Well Developed Infrastructure 16 Sea Ports International Airports Road & Railway Poti Sea Port Rail Tbilisi International Airport • Port has 15 berths • Total Capacity - 10 million tones annually • • 1.5 mln. passengers (Capacity - ~ 3 mln.) 2 344 km (100% electrified) • Capacity of the container terminal - 500 000 TEU cont. annually • Serving 32 destinations • 7,400 rolling stock, 144 locos Existing • Owned/Operated by APM Terminals Batumi Sea Port • Port has 11 berths Batumi International Airport Road • Total Capacity 17 million tones annually • • 210,000 passengers (Capacity – 600 thsd .) Capacity of the container terminal - 100 000 TEU annually • 1,500 km international road • Operated by JSC KazTransOil • Serving 11 destinations • 20,000 km internal and local roads Kulevi Sea Port • East-west highway project Kutaisi International Airport • Port has 2 berths • Annual capacity 5 mln tones annually • • 218,000 passengers (Capacity – 600 thsd .) Owned/operated by SOCAR (Azerbaijan ) • Serving 9 destinations Supsa Terminal Capacity: 5 mln tones annually Operated by BP Poti Sea Port Rail Tbilisi International Airport • Poti Port has a potential to increase its • Baku-Tbilisi-Kars new railroad line Modernization • • 2nd runaway to be constructed cargo- handling capacity up to 25 million Tbilisi Railway Bypass • tons of cargo per annum. International Cargo terminal Planned Anaklia Deep Sea Port Road Kutaisi International Airport • Capable of accommodating Panamax size cargo vessels • East-west highway • Runaway extension • High capacity – up to 100 mln. tons turnover • Rehabilitation of existing infrastructure • Cargo Terminal annually MoESD
Energy Sustainability & Potential Diversified energy supply sources Net electricity exporter since 2008 International Investors One of the top countries in the world by the water resources per capita Second in the Europe by the water reserves amount 300 rivers out of total 26,000 for electricity generation Currently, only 20% of hydro potential is utilized Hydro Potential for development - 40 TWh Well developed electricity transmission infrastructure Increasing demand on electricity in neighboring countries Already Licensed Installed Capacity – 2,790 MW 10 years perspective – 6,318 MW 3,528 MW Up to USD 700 mln FDI per year Up to USD 7 bln FDI in 10 years MoESD
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