Georgian Economic Outlook November, 2015 Country Overview Area 69 - - PowerPoint PPT Presentation

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Georgian Economic Outlook

November, 2015

MoESD

Country Overview

Area 69 700 sq km Population 3,7 mln Life expectancy 72.9 years Official language Georgian Literacy 100% Currency Lari (GEL) GDP: 2014* US$ 16.5 billion GDP - real growth rate 2014 4.6% GDP - Per Capita 2014 US$ 4,426.3* Inflation rate 2014 (average annual; e-o-p) 3.1%; 2.0% Public External debt to GDP 2014 26.8%

Resilient Economy Proved by Sovereign Credit Ratings

BB- Stable BB- Stable Ba3 Positive

* Source: GeoStat & MoESD calculation (according to Census, 1st January 2015 )

MoESD

Georgia in International Ratings

46.9 49.8 52.1 57.5 61.0 63.2 67.1 69.7 73.0 74.7 76.8 82.1 89.4 89.6 Ukraine 162 Belarus 153 Russia 143 Moldova 111 Azerbaijan 85 Turkey 70 Armenia 52 Latvia 37 Georgia 22 Lithuania 15 Estonia 8 New Zealand 3 Singapure 2 Hong Kong 1

free (100-80) mostly unfree (59.9-50) repressed (49.9-0) mostly free (79.9-70) moderately free (69.9-60)

Index of Economic Freedom, 2015 Heritage

128 118 103 99 82 71 35 22 19 12 3 2 1 Ukraine Azerbaijan Moldova Russia Turkey Latvia Latvia Estonia Lithuania Georgia New Zealand Singapore Hong Kong Up from #62 in 2003

World Economic Freedom, 2015 Fraser

Up from #99 in 2005

Doing Business, 2016

112 83 63 55 51 35 24 22 20 16 3 2 1 Georgia /2006 Ukraine Azerbaijan Turkey Russia Armenia Georgia Latvia Lithuania Estonia Denmark New Zealand Singapure Up from #112 in 2005



“Globally, Georgia improved the most in the areas measured by Doing Business

• ver the past 12 years”



“Georgia made improvements in all 10 areas included in the aggregate distance to frontier score, through 39 regulatory reforms”



“Georgia stands out in Europe and Central Asia for having made big strides toward better and more efficient business regulation” Source: WB

Significantly improved position in Property Rights

MoESD

Free Industrial Zones “Produce in Georgia”

37% 32% 26% 26% 22% 21% 19% 18% 15% 8% 7% 7% 6% 5% 4% 3% 1% Ukraine Kazakhstan Serbia Lithuania Greece Turkey Latvia Armenia Czech Rep Bulgaria USA Romania Estonia UK Georgia Norway Denmark % admitting having paid a bribe 28.8 36.5 43.8 44.7 49.5 53.8 56.3 60.1 60.6 66.3 71.2 71.6 72.6 74.5 79.3 81.3 88.5 93.3 100.0 Ukraine Russia Azerbaijan Kazakhstan Bosnia & Herz. Moldova Serbia Armenia Albania Turkey Bulgaria Romania Italy Hungary Georgia Czech Rep. USA Estonia Singapore Ahead of 10 EU member countries

up 5.6p y/y

Global Corruption Barometer 2013 World Governance Indicators 2014

Georgia improved ranking in all 2014 WGI  Voice & accountability - up 1.2p y/y to 55.7  Political stability - up 3.7p y/y to 35.9  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  Control of corruption - up 9.5p y/y to 75.5

Source: Transparency International

Corruption Free Government & Good Governance

Source: WB

70% of surveyed thinks that corruption has been decreased

03

Tax Misery & Reform Index 2009, Forbes - 4th Least Tax Burden Country in the World

Dividend and Interest Tax 5% 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

No

• Payroll Tax
• Social insurance Tax
• Capital gains Tax
• Wealth Tax
• Foreign source income of individuals fully exempted
• Accelerated depreciation on capital assets
• Loss carry forward for corporate profit Tax purposes (10 years)
• No restrictions on currency convertibility or repatriation of capital &profit
• Double Taxation avoidance treaties with 47 countries

Double Taxation Avoidance Treaties with 49 countries

Simple, Low, Efficient and Fair Tax System

MoESD

MoESD

Growing & Diversified Economy

Nominal GDP and Real Growth Growing GDP Per Capita Diversified Economy GDP 2014*

Source: GeoStat

7.8 10.2 12.8 10.8 11.6 14.4 15.8 16.1 16.5 9.4% 12.6% 2.6%

• 3.7%

6.2% 7.2% 6.4% 3.3% 4.6% 5 10 15 20 2006 2007 2008 2009 2010 2011 2012 2013 2014* US$ billion Nominal GDP GDP real growth

Trade, 17.5% Industry, 16.9% Transport & Communication, 10.4% Public Administration, 9.9% Agriculture, 9.3% Construction, 7.1% Healthcare, 6.0%

• ther, 22.9%

1.3% 2.5% 2.6% 3.3% 3.6% 4.0% 4.1% 4.1% 4.8% 6.3% 0% 1% 2% 3% 4% 5% 6% 7% 0% 1% 2% 3% 4% 5% 6% 7% Hungary Ukraine Czech Republic Estonia Latvia Poland Lithuania Russia Turkey Georgia

Average real GDP growth (2003-2014)

Top performer in the region

Source: IMF, GeoStat

1,764 2,315 2,921 2,455 2,623 3,231 ,3523 3,600 4,426 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 2006 2007 2008 2009 2010 2011 2012 2013 2014* US$

MoESD 450 1,190 2,015 1,564 658 814 1,117 912 942 1,758 7.0 15.3 19.8 12.2 6.1 7.0 7.7 5.8 5.8 10.6 5 10 15 20 25 500 1000 1500 2000 2500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* % US$ million FDI share in GDP (%)

FDI inflows

25% 18% 12% 11% 8% 7% 6% 2% 11% Transport and Communication Construction Manufactuing Energy sector Real estate Financial sector Mining Hotels and restaurants Other sectors

FDI Breakdown by Sectors 2014 In 2014, FDI to Georgia amounted to 1,758.4 mln USD which is not

• nly 86,7% increase compared to 2013, but also the highest yearly

indicator over the last 6 years. FDI Share in GDP – up from 6.1% to 10.6% in 2014 Georgia

• has Bilateral Investment Treaties (BIT’s) with the 29 countries
• (negotiations launched with 2 countries)
• is member of ICSID Convention (since 1992)

Largest Investor Countries 2014*

Netherlands 21% Azerbaijan 19% China 12% USA 10% Luxemburg 6% United Kingdom 6% Russian Federation 5%

Source: GeoStat

Foreign Direct Investment

56

Access to ~ 900 Million market without duty

Most Favored Nation (MFN) since 2000

EU

Duty Free access to 500 mln market

Since September 2014

CIS

US, Canada, Japan, Norway, Switzerland

DCFTA FTA GSP

T urkey

FTA

 Simple, transparent & business oriented customs procedures  Efficient tax administration  No quantitative restrictions and tariff barriers  Average Customs Clearance ~ 15 minutes  0% of customs duties over 80% of imports  0% customs duty on export  0% of VAT on export  Maximum customs duty on imports – 5-12%

Liberal Trade Regimes

FTA with EFTA – ongoing negotiations

Duty Free access to additional 14 mln market

FTA with China– negotiations will start in nearest future

Access to additional 1.5 bln market

MoESD

Road & Railway

Rail

• 2 344 km (100% electrified)
• 7,400 rolling stock, 144 locos

Road

• 1,500 km international road
• 20,000 km internal and local roads
• East-west highway project

Sea Ports

Poti Sea Port

• Port has 15 berths
• Total Capacity - 10 million tones annually
• Capacity of the container terminal - 500 000 TEU cont. annually
• Owned/Operated by APM Terminals

Batumi Sea Port

• Port has 11 berths
• Total Capacity 17 million tones annually
• Capacity of the container terminal -100 000 TEU annually
• Operated by JSC KazTransOil

Kulevi Sea Port

• Port has 2 berths
• Annual capacity 5 mln tones annually
• Owned/operated by SOCAR (Azerbaijan )

Supsa Terminal

Capacity: 5 mln tones annually Operated by BP

Poti Sea Port

• Poti Port has a potential to increase its

cargo- handling capacity up to 25 million tons of cargo per annum.

Anaklia Deep Sea Port

• Capable of accommodating Panamax size cargo vessels
• High capacity – up to 100 mln. tons turnover

annually

Rail

• Baku-Tbilisi-Kars new railroad line Modernization
• Tbilisi Railway Bypass

Road

• East-west highway
• Rehabilitation of existing infrastructure

16

Planned Existing International Airports

Tbilisi International Airport

• 1.5 mln. passengers (Capacity - ~ 3 mln.)
• Serving 32 destinations

Batumi International Airport

• 210,000 passengers (Capacity – 600 thsd.)
• Serving 11 destinations

Kutaisi International Airport

• 218,000 passengers (Capacity – 600 thsd.)
• Serving 9 destinations

Tbilisi International Airport

• 2nd runaway to be constructed
• International Cargo terminal

Kutaisi International Airport

• Runaway extension
• Cargo Terminal

Well Developed Infrastructure

MoESD

MoESD

Energy Sustainability & Potential

 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

Installed Capacity – 2,790 MW

Already Licensed 3,528 MW

10 years perspective – 6,318 MW

Up to USD 7 bln FDI in 10 years Up to USD 700 mln FDI per year

Diversified energy supply sources Net electricity exporter since 2008

International Investors

 12 000 historical and cultural monuments  2400 spring of mineral waters  103 resorts and 182 resort areas;  84 protected areas  UNESCO heritage cites  Youth Olympics in 2015  Tbilisi Silk Road Forum in 2015  UEFA Super Cup in 2015

The New Y

• rk Times ranked Georgia 6-th among 52 best countries for the tourism destination

241 313 384 447 476 659 955 1,411 1,720 1,787

• 500

1,000 1,500 2,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

International Tourism Receipts mln.USD

2011 2012 2013 2014 2,82 mln 5,37 mln 5,50 mln 4,39 mln

Growing International Arrivals - 95 % increase in number of t

• urists since 2011

Tourism Growing

MoESD

MEDICAL & SPA RESORTS

Development of Spa Resorts Include hotels, Different types of Clinics, fitness, Outdoor activities Tskaltubo, Akhtala, Borjomi, Abastumani, Other locations

“SUN-BEACH” RESORTS

Expansion of summer “sun and beach” franchise focusing on high-end segment New master resort development All inclusive summer resorts Batumi, Anaklia, Kobuleti, Other Black Sea locations

WINTER SKI RESORTS

Master development of winter resorts with unique profile equivalent to the Alps Government is fully committed to provision of basic infrastructure Main Locations: Mestia, Gudauri, Bakuriani, Goderdzi Majestic landscapes allowing for a wide range of summer tourism activities such as trekking, horse riding, bird watching and river racing Mestia, Gudauri, Bakuriani, Goderdzi, Kazbegi and other locations

FOUR SEASON RESORTS 60

Development of the Gaming Industry to Serve regional markets. Gambling Industry is prohibited in neighboring countries. Around 70% of international visitors are nationals of gambling prohibited countries. Include hotels, casino entertainment, family Services and shopping

GAMING INDUSTRY

Tourism Prospects

MoESD

MoESD

13.4% 13.7% 25.1% 25.3% 25.6% 26.5% 29.4% 34.8% 38.9% 41.2%

0% 10% 20% 30% 40% 50% Euro Armenia Azerbaija n Moldova Turkey Georiga Russia Ukraine Belarus Kazakhst an

Weakening against US$

0% 10% 20% 30% 40% 50% 60% Georgia Turkey Ukraine Russia Belarus Moldova Armenia Azerbaijan

Reserve loss, %

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% Georgia Kyrgyz Rep. Kazakhstan Latvia Slovak Rep. Romania Macedonia Lithuania Moldova Estonia Azerbaijan Armenia Czech Rep. Bulgaria Russia Belarus 2016F 2017F

Source: IMF, WEO October 2015 Source: IMF Source: Bloomberg Note: US$ per unit of national currency; 9 Nov 2014 - 9 Nov 2015

Influence of global & domestic factors on regional currencies Georgia used less reserves to support GEL compared to peers Georgia: Strong GDP growth forecast by IMF

Georgia – Resilient Economy

Support to development of free private sector driving economic growth

trough



Transparent, efficient & optimal government



Free market economy, based on fair competition, absolute respect for property rights and independent judiciary system



Optimal model of smart regulations

GoG’s Guiding Principles

DCFTA Reforms For effective realization of DCFTA reforms are ongoing and GoG is committed to follow DCFTA Reform Agenda Transition from analogue to digital broadcasting in very short time. Licensing requirement for broadcasters was abolished Digital Forecasting Internetization of rural regions of Georgia is ongoing Internetization

Georgia – Government Vision & Reforms

Some of the Important Reforms & Projects

MoESD

Cadastre

• Inventorizaion process of state owned property
• Land registration throughout Georgia

For full inclusion of still inactive property in economic activities

Large Scale Investment Projects

MoESD

Expansion of the South Caucasus Pipeline through Azerbaijan and Georgia

 Additional USD 2 bln FDI in Georgia  16 billion cubic meters of new natural gas to Europe and Turkey.

Construction of civil airplanes composite parts’ manufacturing plant

 Additional USD 85 mln FDI in Georgia  Supply of Boeing, Airbus, Bombardier and others

Construction HPP Nenskra

 Investors: K-Water, EBRD, ADB  Additional USD 1 bln investment in Georgia  Additional 280 MW installed capacity  Strategic location  Capacity of accommodating Panamax type cargo vessels  All round year transportation  High capacity – up to 100 mln. tons turnover annually  Up to USD 1 bln for first phase (out of 9) in Georgia

Anaklia Deep Sea Port Shortest Root from China to Georgia

Thank you for your attention

Ministry of Economy and Sustainable Development

• f Georgia