Quarterly Review of the Georgian Economy - GFSIS · 2018-05-11 · The Quarterly Review of the...

Quarterly Review of theGeorgian Economy

IV Quarter of 2017

April 2018

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The Quarterly Review of the Georgian Economy is an electronic publication of the Georgian Foundation for Strategic and International Studies (Rondeli Foundation), which aims at informing readers about the ongoing processes within the country’s economy. The review is based on data of official statistics and on expert estimates.

The group of authors: Merab Kakulia (team leader) Nodar Kapanadze Lela Bakhtadze

Contact details: Georgian Foundation for Strategic and International Studies3a Chitadze Street Tbilisi, Georgia, 0108Phone + 995 32 247 35 55, Fax + 995 32 298 52 65 E-mail- [email protected]

The project is being implemented with the financial support of the Swedish International Development Cooperation Agency (SIDA).

The review expresses the opinion of the author’s group and might not reflect the opinion of the Georgian Foundation for Strategic and International Studies and SIDA.

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Contents

1. Economic Growth .................................................................................................................................3

2. Employment ...........................................................................................................................................8

3. Consolidated Budget and State Debt ...................................................................................................13

4. Inflation ...............................................................................................................................................17

5. Foreign Trade ......................................................................................................................................19

6. Foreign Direct Investment ..................................................................................................................24

7. Banking Sector ....................................................................................................................................28

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1. Economic Growth

Table 1.1: Dynamics of Nominal and Real GDP GDP in current prices, mln. Gel

GDP in constant 2010 prices, mln.

GEL

GDP real growth, percent

GDP deflator, percent

GDP per capita (current prices),

GEL **

GDP per capita (current prices),

USD **

GDP in current prices, mln. USD

2012 26167 23654 6.4 1.0 5818 3523 158472013 26847 24455 3.4 -0.8 5988 3600 161402014 29151 25586 4.6 3.8 6492 3676 165082015 31756 26323 2.9 5.9 8551 3767 139882016 34029 27072 2.8 4.2 9146 3865 14378

Q1 7419 5699 2.9 4.9 1994 819 3047Q2 8262 6545 3.1 2.6 2221 1004 3734Q3 8892 7095 2.6 4.6 2390 1029 3829Q4 9455 7733 2.8 4.7 2541 1018 3788

2017* 38042 28422 5.0 6.5 10231 4079 15165Q1 8332 6003 5.3 6.6 2241 861 3201Q2 9196 6864 4.9 6.1 2473 1023 3802Q3 9942 7408 4.4 7.1 2674 1105 4107Q4 10572 8147 5.4 6.1 2843 1096 4077

Source: National Statistics Office of Georgia (GeoStat)Note: * Preliminary data

** Per capita indicators of 2015, 2016 and 2017 are compiled in line with updated data from the 2014 general population census. Pre-census demographic data were used for calculation of the per capita indicators of previous years. Recalculation of 2003-20014 per capita indicators will be produced after release of the final 2014 population census data.

The real increase of GDP in QIV of 2017, compared with the corresponding period of the previous year, was 5.4 percent, while the real increase of seasonally corrected GDP* was 3.7 percent. Indicators of real economic growth with and without seasonal corrections demonstrated contradicting trends in 2017; while in 2015 and 2016 the dynamics of mentioned indicators were synchronous. Thus, it could be said that the relatively high rates of GDP growth in the last two quarters of 2017 were not connected to seasonality.

The contributions of different sectors of economy to the real GDP growth in QIV of 2017 differed substantially (see Table 1.2). The trade and household service sector made the biggest contribution to economic growth. The contributions of the industry, construction and transport sectors were also important, while the financial sector had a relatively modest role despite having the highest growth rate in the analyzed period.

5.36%

3.74%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

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Chart 1: Quarterly dynamic of GDP real growth rates compared to respective period of previous year

GDP real growth rate Real growth rate of seasonally adjusted GDP

Source: National Statistics Office of Georgia (GeoStat) and calculation of the group of authors

If we review the contributions of the economic sectors from the perspective of 3.7 percent growth of seasonally adjusted real GDP, we get a different picture: the share of industry comes to 0.2 percentage points i.e. is decreased almost three times

* The dynamics of the quarterly data demonstrates that both nominal and real GDP indicators are under the influence of seasonality: the volume of real GDP in QI decreased by almost 15 percent, due to seasonality, while in QIV it increased by almost 13 percent. The seasonal effect is relatively low on the indicators of QIII and insufficient on the ones of QII.

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compared to the figure received without taking into consideration seasonality in real GDP growth (5.4 percent), while the share of trade, household service, hotels and restaurant sectors is reduced from 1.3 percentage points to 1 percentage points. Otherwise, seasonal effect on industry is too high, while seasonal changes have less effect on trade and household service.

The sector most reduced in QIV 2017 compared with the respective period of the previous year, was agriculture, forestry and fishery. While the real decrease was not dramatic – 2.5 percent (in the previous quarter it was 2.8 percent), nevertheless, a negative growth rate was demonstrated in a sector that provides more than half of total employment.

It should be highlighted that the seasonally corrected indicator of real annual growth of mentioned sector was positive – 0.2 percent, which means that the decrease in the agrarian sector was not caused by seasonal changes.

Table 1.2: Real growth rates of individual sectors and their contribution to real change of GDP in QIV of 2017

Real growth of economic sectors Seasonally adjusted real growth of economic sectors

Annual change

(mln. GEL)

Annual change (%)

Contribution to change of GDP

(percentage points)

Annual change

(mln. GEL)

Annual change (%)

Contribution to change of GDP

(percentage points)

Agriculture, hunting and forestry; fishing, fishery -12.3 -2.5 -0.2 0.8 0.2 0.0

Industry, total 73.1 7.6 0.9 16.0 1.9 0.2Mining industry 4.3 6.1 0.1 -1.0 -1.6 0.0Manufacturing Industry 64.4 9.4 0.8 6.1 1.0 0.1Production and distribution of electricity, gas and water 4.4 2.2 0.1 7.8 4.8 0.1

Construction 46.2 9.5 0.6 14.9 3.3 0.2Household production -8.6 -4.2 -0.1 0.9 0.6 0.0Trade; repairing cars, household goods and personal belongings 84.0 6.9 1.1 52.2 5.3 0.8

Hotels and restaurants 19.4 9.2 0.3 20.1 11.2 0.3Transport and communication 46.8 6.9 0.6 8.6 1.3 0.1Transport 49.1 10.6 0.6 11.8 2.6 0.2Communication -2.3 -1.1 0.0 -2.3 -1.1 0.0Financial activity 34.5 15.4 0.4 24.6 9.8 0.4Operations with real estate, lease and customer service 22.4 5.0 0.3 22.1 6.2 0.3

Conditional price for using own dwelling 1.3 0.7 0.0 1.1 0.6 0.0

Public governance 23.2 2.8 0.3 35.0 5.1 0.5Education 13.9 4.5 0.2 10.5 4.0 0.2Healthcare and social support 13.7 3.9 0.2 3.0 0.9 0.0Other utilities, social and personal services 12.7 4.6 0.2 15.2 5.6 0.2

Activities of house worker and household elated to production of goods and services for own consumption

-0.1 -1.3 0.0 -0.2 -4.3 0.0

Indirect assessment of financial intermediation services -19.5 16.7 -0.3 -4.3 3.7 -0.1

GDP in market prices 356.9 5.3 4.6 241.2 4.0 3.5(+) Taxes on products 59.5 5.7 0.8 21.0 2.2 0.3(-) Subsidies on products 2.0 5.3 0.0 1.3 3.5 0.0GDP in market prices 414.6 5.4 5.4 257.7 3.7 3.7


Since late 2013, the agriculture, forestry and fishery sector in general demonstrated a decreasing trend, which is clearly shown by the series of seasonally corrected data. Additionally, in the last two quarters of 2017, the opposite dynamics of real increase data with and without seasonal correction is observed. Meaning that in the analyzed period, the aforementioned decrease in the agrarian sector is caused by structural and not seasonal factors.*

* The seasonal impact on branches of the agrarian sector is a little different. In fact the detailed analysis of growth in this sector in constant prices is not possible, however disaggregated assessments of the nominal GDP demonstrate that the reason for this is sharply opposite seasonality of main branches of the agricultural sector - plant and animal husbandry, which finally neutrilize each other.

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-2.50%

0.18%

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Chart 2: Real growth rates in Agriculture, forestry and fishing sector compared to respective period of previous year: quarterly dynamic

Real growth rate Seasonally adjusted real growth rate


In QIV of 2017, the real growth rate of industry was 7.6 percent, compared with the corresponding period of the previous year, which is 1.1 percentage points more than the respective annual indicator of the previous quarter. Manufacturing is increasing dramatically, with the annual growth rate (9.4 percent) being 5.2 percentage points higher than the corresponding indicator of the previous quarter. A high growth rate was observed in the mining industry as well (6.1 percent), however, compared to the previous quarter it was reduced by 4.5 percentage points. The real growth rate of electricity, gas and water production and distribution was relatively modest (2.2 percent) and 2.8 percentage points lower than the same indicator of the previous quarter.

In general, industry growth was accelerated in the second half of 2017. Taking into consideration the decrease of seasonally corrected indicators, we can assume that the rising dynamics of this sector in our given period was basically preconditioned by structural factors. Their influence was especially clearly demonstrated in the manufacturing industry, relatively less so in the mining industry, and much less so in the electricity, gas and water production and distribution industry (see Table 1.2).

7.60%

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Chart 3: Real growth rates in industry compared to respective period of previous year: quarterly dynamic



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The construction sector grew significantly – 9.5 percent in QIV of 2017 compared with the respective period of the previous year, which was slightly more than the similar annual indicator of the previous quarter. Taking into consideration seasonal adjustment, the real growth rate was much less – 3.3 percent. This indicates that in the analyzed period, structural factors still had a decisive role in the growth of the mentioned sector.

It is also of note that that in the second half of 2017, the real growth of construction slowed significantly, which is proven by the analysis of seasonally corrected indicators.

9.46%

3.29%

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Chart 4: Real growth rates in construction sector compared to respective period of previous year: quarterly dynamic



Compared with the corresponding period of the previous year, in QIV of 2017, the growth rate was quite high in the trade and cars, household goods and personal belongings repair sector (6.9 percent), however, the growth rate in the analyzed period was 2 percentage points less than the corresponding indicator of the previous quarter.

7.26%

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Chart 5: Real growth rates in trade and consumer services sector compared to respective period of previous year: quarterly dynamic



In QIV of 2017, a relatively high real growth was demonstrated in the hotels and restaurants sector – 11.2 percent, however, a slight decrease of annual growth rate, compared with the previous quarter, was observed here as well. It is noteworthy that in recent years, the seasonal effect was quite important in this sector, compared to others, which could be considered as an outcome of insufficient seasonal diversification of tourism in the country.

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9.24%

11.22%

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Chart 6: Real growth rates in hotels and restaurants sector compared to respective period of previous year: quarterly dynamic



In QIV of 2017, the real growth of the transport and communication sector was quite high, compared with the respective period of the previous year (6.9 percent). In the analyzed period, the growth rate significantly exceeded the corresponding annual indicators of the previous quarter, which was entirely preconditioned by a sharp increase of transport services, while in communication, an insufficient decrease was observed (see Table 1.2).

6.94%

1.28%

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Chart 7: Real growth rates in transport and communication sector compared to respective period of previous year: quarterly dynamic



It is noteworthy, that the real annual growth of the transport sector is much higher than its corresponding indicator, taking into consideration seasonal correction (10.6 and 2.6 percent respectively), which indicates that the big increase in this sector is not preconditioned by changes associated with seasonality. The picture is different in communications, where a possible seasonal effect is obvious.

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2. Employment

Table 2.1: Dynamics of employment and unemployment indicators

Popu

latio

n ag

ed 1

5 an

d ol

der

(Tho

usan

d pe

rson

s)

Act

ive

popu

latio

n (la

bor

forc

e) b

y IL

O c

riter

ion

(Tho

usan

d pe

rson

s)

Empl

oyed

by

ILO

crit

erio

n (T

hous

and

pers

ons)

Among them

Une

mpl

oyed

by

ILO

cr

iterio

n (T

hous

and

pers

ons)

Une

mpl

oym

ent r

ate

by IL

O

crite

rion

(per

cent

age)

Labo

r for

ce p

artic

ipat

ion

rate

(per

cent

age)

Empl

oym

ent l

evel

(p

erce

ntag

e)

Hire

d em

ploy

ed

(Tho

usan

d pe

rson

s)

Self-

empl

oyed

(T

hous

and

pers

ons)

2012 3034 2029 1724 663 1054 305 15.0 66.9 56.8

2013 3026 2004 1712 658 1044 292 14.6 66.2 56.6

2014 2996 1991 1745 692 1046 246 12.4 66.5 58.3

2015 2980 2022 1780 753 1018 242 12.0 67.8 59.7

2016 2962 1998 1763 745 1011 235 11.8 67.5 59.5

Q1 2982 1974 1741 754 979 233 11.8 66.2 58.4

Q2 2973 2014 1779 740 1031 235 11.7 67.7 59.8

Q3 2944 2008 1783 745 1032 225 11.2 68.2 60.6

Q4 2947 1997 1750 743 1001 247 12.4 67.8 59.4Source: National Statistics Office of Georgia (GeoStat) and calculation of the group of authors

Recent official data on employment and unemployment cover 2016. The databases of 2017 will be published in May of 2018.*

Based on the data of QIV of 2016, in total, 1750 thousand persons were employed in the Georgian economy, which is 1.9 percent less than the previous quarter and 1.6 percent less than the indicator for the respective period of the previous year. The decrease in the number of employed compared with the previous quarter is in fact fully due to a decrease in self-employment, while the decrease compared with the respective period of the previous year is at the expense of hired employment, without touching self-employment.

According to ILO criteria, the unemployment rate in QIV of 2016 was 12.4 percent, which exceeds the respective indicator of the previous quarter by 1.2 percentage points and is 1.1 percentage points higher than the indicator of the corresponding period of the previous year.

The labor force participation rate (the share of the economically active population of age 15 and older in the analyzed period was 67.8 percent, which is insignificantly less (0.5 percentage points) than the indicator of the previous quarter and is even less significantly (0.2 percentage points) more than the corresponding one of the respective period of the previous year. It could be said that based on recent data available to us, the condition in the country is in fact unchanged in terms of the dynamics of the labor force participation rate.

From 2004-2016, a decrease in the population aged 15 years and older was observed, caused by quite complex demographic conditions and migration. The trend of increasing the weight of hired employment was revealed in the same period, especially in the years 2013-2015. Notably, in 2016, this increase was somehow slowed down and remained around 25 percent throughout the whole year.

The main segment of total employment in the years 2004-2016 was self-employment (34-35 percent of population aged 15 years and older). The dynamics of the self-employed sector among the working age population can be assessed as quite unstable.

In QIV of 2016, the share of economically inactive population among the population aged 15 years and older stood at 23 percent. Although the dynamics of this indicator is also quite unstable, in general, a decreasing trend is observed.

* Until the end of 2016, GeoStat had been assessing employment and unemployment using the Integrated Household Survey, in which the Labor Force Survey module was integrated. Since 2017 the Labor Force Survey was separated from the Integrated Household Survey and is now being carried out based on independent sample. At the moment it is not known whether the databases of the Labor Force Survey will be published on the website of GeoStat, like the databases of the Integrated Household Survey. However, the questionnaire of the Integrated Household Survey contains employment component in the context of revenues survey, which still gives opportunity for structural and sectorial analyses of employment, different from the table given above. Conse-quently, quarterly analyses of mentioned issue will become possible from July of the current year, when the respective information arrays are published.

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56% 58%

57%

56%

54% 56%

56%

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52%

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50% 54

%54

%55

%53

%54

%55

%55

%52

% 54%

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% 59%

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%63

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%62

% 65%

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Chart 8: Distribution of population aged 15 and older by economic status according to ILO criterion (thousand person)

Hired Self-employed Undefined employment status

Unemployed Economically Inactive Employment rate

Labor force participation rate population aged 15 and older


From 2004-2016, the quarterly dynamics of unemployment were distinguished by relatively high seasonality. The time series, corrected seasonally, clearly demonstrated an increasing tendency from 2004-2006; from 2006-2011 the mentioned indicator was more or less stabilized on a high benchmark, while from 2012-2015 – a trend of decrease in unemployment was observed clearly and then in 2016, it again changed to an increasing trend. An opposite trend was demonstrated by the seasonally corrected indicator of the coefficient of participation of labor force, which could be explained by a higher stability level of employment, compared with unemployment.

40%

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Chart 9: Quarterly dynamic of unemployment and labour force participation rate saccording to ILO criteria

Unemployment rate without seasonal adjustment

Seasonally adjusted unemployment rate

Labor force participation rate without seasonal adjustment

Seasonally adjusted labor force participation rate


According to QIV of 2016 data, 48 percent of total employment was in agriculture, preconditioned by high self-employment level in rural areas. This indicator was 2 percentage points lower compared with the previous quarter and fully matched the indicator of the corresponding period of the previous year. Although the weight of agrarian employment is weakly reflected, in general it is a reducing trend.

The second biggest sector of employment is trade and household services, compiling 10 percent of total employment according to the data of QIV of 2016, which was 0.7 percentage points more than the corresponding indicator of the previous quarter and 0.3 percentage points less than the indicator of the respective period of the previous year.

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The weight of employment in industry was 6.7 percent in the analysis period, which is just 0.1 percentage points less than the indicator of the previous quarter as well as of the corresponding period of the previous year.

As such, the distribution of employment by economic sectors is in fact unchanged. The key sector of employment is agriculture and against the background of its asymmetrically high weight, the changes ongoing in other sectors are not statistically significant.

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Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Chart 10: Quarterly dynamic of distribution employees by main sectors (thousand person)

Agriculture, forestry, fishing Trade and consumer services Education

manufacturing Transport and communication Construction

Other sectors Employed, total


Agrarian employment basically covers self-employed people. According to data of QIV of 2016, just 3 percent of total employment in agriculture was hired labor, which is virtually unobservable if you take into account statistical error. This proportion is fully maintained throughout the years 2004-2016.

0

200

400

600

800

1,000

1,200

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Chart 11: Quarterly dynamic of distribution of employees in agriculture by status of employment (thousand person)

Hired employed in agriculture Self-employed in agriculture Employed in agriculture, total


According to QIV data of 2016, 53 percent of total employment in the trade and household service sector was hired labor (see Chart 12). This indicator is 5 percentage points less than the corresponding indicator of the previous quarter and 3 percentage points less than the corresponding indicator for the respective period of the previous year. There is a high probability that this change is of an episodic nature. In general, the share of hired employment in trade and household services increased in 2014-2016, and correlating with a reduction of self-employment in the same sector, which attests to the fact that the process of institutional arrangement of trade and household service has been irreversible in the course of the given period.

11

0

50

100

150

200

250

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Chart 12: Quarterly dynamic of distribution of employees in trade and consumer services sector by status of employment (thousand person)

Hired employed in trade and cosumer services Self-employed in trade and consumer services

Employed in trade and consumer services, total


Another source of information on employment is the business sector statistics, which registers the number of people employed in this sector and is substantially different from the Integrated Household Survey. This source covers just formal employment; it does not record most of the self-employed sector and those hired based on oral arrangements. The mentioned difference is proven by the dynamics of the number of employed people counted according to business sector statistics, which steadfastly demonstrates a rising trend.

323 34

134

434

032

4 334

329

334

323

331

330

338

311

316

318

322 35

9 371

365

366

350

352

360 37

947

0 503 517 528

486 50

350

7 519

496 508 520 53

5 545 56

856

9 584

578 60

160

6 621

605 63

1 644 66

0

0

100

200

300

400

500

600

700

0

100

200

300

400

500

600

700

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217

Q317

Q417

Chart 13: Quarterly dynamic of distribution employees by the sectors according to business statistics data (thousand person)

Agriculture, forestry, fishing Trade and consumer services Education

Industry Transport and communication Construction

Other sectors Employed, total


According to the business sector statistics, in QIV of 2017, the number of employed people increased 6.3 percent compared with the corresponding period of the previous year. Due to the reason mentioned above, this change might reflect the trend opposite to the data of the yet unpublished Labor Force Survey of 2017. For example, according to business sector statistics of QIV of 2016, the number of employed people increased 6.6 percent compared to the respective period of the previous year, while according to the Integrated Household Survey data, the number of employed people decreased 4 percent in the course of the same period.

12

According to the business sector statistics, agriculture is presented quite modestly on the level of statistical error, while according to integrated household data, agriculture is a key sector of employment. This attests to a very low level of institutional development of the sector in question.

The number of people employed in trade and household services, industry and construction is approximately the same as demonstrated by the Integrated Household Survey. The increase in the number of people employed in these sectors could be caused by formalization of employment than by real increase of employment.

The number of people employed in the education sector according to business sector statistics is substantially different from the data of the Integrated Household Survey, which is natural since business statistics do not cover the budget sector, where the biggest part of people working in education are employed.

13

3. Consolidated Budget and State Debt

Table 3.1: Total Revenues of Consolidated Budget

Total revenues ** (mln. GEL)

Total tax revenues (mln. GEL)

GDP %

Tota

l re

venu

es

Tota

l tax

re

venu

es

VAT

Prof

it ta

x

Exci

se ta

x

Inco

me

tax

Impo

rt ta

x

Prop

erty

ta

x

2012 7560.0 6671.0 28.9 25.5 11.6 3.3 2.5 6.7 0.3 0.92013 7434.3 6659.3 27.7 24.8 10.6 3.0 2.7 7.2 0.3 0.92014 8118.9 7241.6 27.9 24.8 11.3 2.8 2.8 6.7 0.3 0.82015 8963.3 8010.8 28.2 25.2 11.0 3.2 2.5 7.0 0.2 0.92016 9675.5 8786.1 28.4 25.8 9.7 3.1 3.1 7.1 0.2 1.1

Q1 2210.1 2048.5 29.8 27.6 8.7 2.8 3.1 5.6 0.3 0.2Q2 2295.8 2109.3 27.8 25.5 9.1 3.7 3.2 7.8 0.1 3.0Q3 2526.6 2317.3 28.4 26.1 10.4 4.2 3.4 7.7 0.2 0.2Q4 2643.0 2311.0 28.0 24.4 9.3 1.8 2.9 7.0 0.2 0.9

2017* 10921.1 9778.8 28.7 25.7 10.8 2.0 3.8 7.7 0.2 1.0Q1* 2623.8 2379.4 31.5 28.5 11.5 0.1 4.0 8.9 0.2 0.9Q2* 2701.0 2371.7 29.4 25.8 10.4 2.5 3.6 7.8 0.2 3.0Q3* 2709.6 2457.3 27.3 24.7 11.0 1.3 3.9 7.3 0.2 0.1Q4* 2886.7 2573.4 27.3 24.3 10.5 1.3 3.9 6.9 0.2 0.9

Source: Ministry of Finance of Georgia, National Statistics Office of Georgia (GeoStat) and calculation of the group of authorNote: * preliminary data ** without financial and non-financial assets

In QIV of 2017, the total revenues of the consolidated budget of Georgia demonstrated high growth rate (9.2 percent), compared with the analogous period of the previous year. The indicator of quarterly growth compiled 6.5 percent. Annual as well as quarterly dynamics were preconditioned basically by an increase of funds mobilized from taxes and other revenues; in particular fines imposed on entrepreneurs for tax and customs violations.

In the analyzed period, the structure of tax revenues of the consolidated budget underwent certain changes, in particular: rising dynamics of revenues mobilized from VAT resulted in a sharp increase of its share (5.1 percentage points) in the annual perspective and a noticeably change (1.5 percentage points) in the quarterly time-frame; compared with the corresponding period of previous year, significant (22.4 percent) decrease of funds obtained from income tax preconditioned decrease of its share by 6.6 percentage points; while extremely high (47.9 percent) annual increase in the revenues mobilized from excise tax ensured increase of its share by 3.9 percentage points in annual terms.

50%

48%

50%

54% 49

%54

%53

%58

% 42%

43%

43%

45%

50%

43%

45%

48% 44%

45%

46%

46% 43

%43

% 48%

47% 45

%42

%47

%48

% 43%

42%

43%

44%

45%

47% 46

%45

% 45%

42% 44%

44%

36%

36% 40%

38% 40

%40

%45

%43

%

-20000

-16000

-12000

-8000

-4000

0

4000

-20%

0%

20%

40%

60%

80%

100%

120%

06Q

106

Q2

06Q

306

Q4

07Q

107

Q2

07Q

307

Q4

08Q

108

Q2

08Q

308

Q4

09Q

109

Q2

09Q

309

Q4

10Q

110

Q2

10Q

310

Q4

11Q

111

Q2

11Q

311

Q4

12Q

112

Q2

12Q

312

Q4

13Q

113

Q2

13Q

313

Q4

14Q

114

Q2

14Q

314

Q4

15Q

115

Q2

15Q

315

Q4

16Q

116

Q2

16Q

316

Q4

17Q

117

Q2

17Q

317

Q4

Chart 14: Quarterly dynamic and structure of tax revenues in 2006-2017* (mln.GEL)

Income tax Profit tax VAT

Excise tax Import tax (Custom tax) Property tax

Other, non classified taxes Taxes, total

Source: Ministry of Finance of Georgia, National Statistics Office of Georgia (GeoStat) and calculation of the group of author Note: * preliminary data

14

In QIV of 2017, VAT remained a key source for tax revenues: its annual increase compiled 26 percent, which basically was preconditioned by the funds mobilized in the form of VAT from imported products. VAT funds obtained from this channel two and more times exceeded the funds accumulated in consolidated budget from the products sold and services provided on the territory of Georgia.

In the analyzed period, the annual dynamics of revenues obtained in the form of income tax were distinguished by quite high growth (9.6 percent). The aforementioned was influenced by an increase of revenues received from the activities of individuals and individual entrepreneurs and well as dividends received by individuals.

In QIV of 2017, the annual increase in the funds received from property tax stood at 10.7 percent. This was basically caused by the increase of revenues mobilized from this tax paid for the property of enterprises and non – agricultural land.

In the analyzed period, extremely high annual and a moderate quarterly increase of excise tax was observed (47.9 and 4.6 percent respectively). The dynamics of annual increase of the mentioned tax was associated with a rise in the prices of imported tobacco, petrol and diesel fuel, also with increase of funds mobilized as excise tax for local tobacco products, mobile communication service as well as consumption of natural gas.

In QIV of 2017, the share of grants among total revenue was reduced by 3.6 percentage points, compared to the corresponding period of the previous year, caused by the reduction of current grants from international organizations.

In the analyzed period, an impressive quarterly and annual decrease in nonfinancial assets was observed (5.1 and 2.8 times), preconditioned by a sharp reduction in funds obtained from the sales of buildings and premises.

In QIV of 2017, the increase in financial assets was caused by attracting financial resources from domestic assets, in particular loans, shares and other capital, as well as foreign loans.

Table 3.2: Consolidated Budget expenditures Total expen-ditures (mln.

GEL)

GDP %Total

expenditure General purpose

state servicesDefence, public

order and securitySocial

protection Education Healthcare State debt service

2012 7 994.0 31 3.6 2.7 6.6 2.9 1.6 32.52013 7 863. 6 29 3.4 2.4 7.4 3.1 2.0 33.92014 8 813.3 30 3.4 2.2 8.2 3.2 2.4 35.42015 9 659.4 30 3.4 2.1 7.8 3.4 2.9 41.32016 10 522.1 31 3.4 2.1 7.8 3.8 3.1 44.4

Q1 2 208.3 30 3.5 2.4 8.6 3.7 3.2 177.4 Q2 2 565.0 31 3.4 2.0 7.8 3.6 3.1 159.4 Q3 2 720.5 31 3.3 2.0 7.7 3.7 2.9 239.6 Q4 3 028.3 32 3.6 2.3 7.3 4.1 3.1 159.7

2017* 11 474.6 30 3.2 1.8 7.3 3.8 3.0 44.0Q1* 2 338.1 28 3.5 1.7 8.3 3.8 3.1 173.7Q2* 2 878.1 31 3.2 1.8 7.5 4.1 3.0 163.1Q3* 2 885.6 29 3.0 1.9 6.9 3.4 2.7 158.7Q4* 3 372.9 32 3.3 1.9 6.6 4.1 3.1 158.2

Source: Ministry of Finance of Georgia, National Statistics Office of Georgia (GeoStat) and calculation of the group of author Note: * preliminary data

According to the economic classification of the consolidated budget, within the analyzed period, 32.8 percent of total expenditures accounted for the current expenses; of which 15.7 percent of expenses were made for labor reimbursement, 17.1 percent – procurement of goods and services and 7.5 percent – for subsidies.

In QIV of 2017, compared with the corresponding period of previous year, the structure of consolidated budget expenditure was slightly changed: as a result of a 2.3 percentage point increase of the share of expenditures among economic activities, it occupied the leading position. The aforementioned preconditioned the 3.2 percentage points decrease in the share of social protection expenses, due to which it moved from first to second position. The share of general-purpose expenditure as well as of public order and security funding also changed slightly (0.8 and 0.4 percentage points respectively).

15

15%

11% 9% 9%11

%4%

4% 1% 12%

7% 5% 6%24

% 20%

21% 17

%26

% 21%

21%

18% 25

%20

%22

% 20%

29%

26%

27%

22%

31%

27%

27%

25%

30%

25%

25% 24%

29%

25%

25%

23%

29%

24% 24%

21%

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

4000

0%

20%

40%

60%

80%

100%

120%

07Q

107

Q2

07Q

307

Q4

08Q

108

Q2

08Q

308

Q4

09Q

109

Q2

09Q

309

Q4

10Q

110

Q2

10Q

310

Q4

11Q

111

Q2

11Q

311

Q4

12Q

112

Q2

12Q

312

Q4

13Q

113

Q2

13Q

313

Q4

14Q

114

Q2

14Q

314

Q4

15Q

115

Q2

15Q

315

Q4

16Q

116

Q2

16Q

316

Q4

17Q

117

Q2

17Q

317

Q4

Chart 15: Quarterly dynamic and structure of budget expenditures in 2007-2017* (mln. GEL)

State services of general prescription Defense Public order and security

Economic activity Education Social service

Other Expenditures, total

Source: Ministry of Finance of Georgia, National Statistics Office of Georgia (GeoStat) and calculation of the group of author Note: * 2017 preliminary data

In the analyzed period, an impressive - 46 percent annual increase - was observed in financing of economic activities from the consolidated budget. Its quarterly growth rate was also quite high (31 percent). Such dynamics were caused by an increase of funds allocated for construction, reconstruction and rehabilitation of international and domestic roads and hydropower plants.

In QIV of 2017, the expenditures of the consolidated budget for social protection increased insignificantly, compared with the corresponding period of the previous year as well as with the previous quarter, which could be explained by high basic indicators.

In the analyzed period, moderate (11 percent) annual and high (29 percent) quarterly growth rates were observed in the education sector. These were ensured by an increase of funding for equipping higher education institutions, computerization of public schools, modernization of the infrastructure of education system and updating of library funds.

In QIV of 2017, the increase of healthcare funding compared with the corresponding period of the previous year compiled 11 percent. The growth rate compared to the previous quarter was also quite high (23 percent). Such annual and quarterly dynamics of healthcare expenditures were preconditioned by increased funding for the rehabilitation of healthcare facilities, their provision with necessary equipment, and the provision of inpatient care and primary healthcare services to citizens below the poverty line.

In the analyzed period, a high – 20 percent - quarterly increase was observed in expenses made for general-purpose public services. Increase of resources allocated for the mentioned sector was preconditioned by an increase in financing to executive and representative authorities, fiscal activities and international relations.

In QIV of 2017, compared with the corresponding period of the previous year, the volume of consolidated budget deficit (total balance) increased significantly (24.7 percent). The rise of the deficit compared with the previous quarter was impressive (2.9 times). Such annual dynamics of total balance was caused by an increase of non-financial assets. In quarterly perspective, seasonal factor was also added.

In the analyzed period, the biggest part of the state debt of Georgia, 78.9 percent, comprised of foreign debt, while 21.1 percent – domestic debt. Compared with the corresponding period of the previous year, the state debt increased almost 11 percent, while compared to the previous quarter, by 6.1 percent. Significant growth in both perspectives was preconditioned basically by the increase of foreign debt.

In QIV of 2017, debt to multilateral creditors demonstrated increasing dynamics: from the annual perspective, the increase was 15.3 percent, while in quarterly - 9.4 percent. This basically was caused by an increase of loans provided by ADB, IBRD and IDA; out of which the highest share was of loans allocated for funding investment projects and supporting budget (58 percent and 27.5 percent respectively).

16

Table 3.3: Total Budget Balance Total budget

balance (mln. GEL)

Total budget balance (GDP %)

Total budget balance (GDP %)

State debt (mln. GEL) Domestic

debt** Foreign debt** State debt** State debt(GDP %)

2012 -154.7 19.4 0.6 1 895.2 6 617.2 8 512.4 32.52013 -303.7 38.6 1.1 2 016.9 7 089.9 9 106.8 33.92014 -579.5 65.6 2.0 2 570.5 7 742.6 10 313.0 35.42015 -341.0 35.3 1.1 2 827.3 10 282.1 13 109.4 41.3 2016 -479.4 45.6 6.5 3 170.6 11 932.1 15 102.7 44.4

Q1 67.2 3.0 0.9 2 791.4 10 370.7 13 162.1 77.4 Q2 -162.9 63.5 2.0 2 871.3 10 284.4 13 155.7 62.8 Q3 -123.6 45.4 1.4 3 010.2 10 371.3 13 381.5 66.5Q4 -260.1 85.9 2.8 3 170.6 11 932.1 15 102.7 62.6

2017* -324.1 28.2 -0.9 16 729.1 13 193.9 16 729.1 49.2Q1* 343.9 14.7 0.1 3 252.5 11 193.0 14 445.5 57.7Q2* -126.6 44.0 1.4 3 418.2 11 578.8 14 997.0 61.3Q3* -137.3 47.6 1.4 15 772.4 12 287.8 15 772.4 63.0Q4* -404.1 12.0 3.8 16 729.1 13 193.9 16 729.1 63.2

Source: Ministry of Finance of Georgia and National Statistics Office of Georgia (GeoStat)Note: * Preliminary data ** End of period

The annual dynamic of the state foreign debt service demonstrated significant decrease in the analyzed period. The mentioned was preconditioned by the reduction in funds paid for servicing of principal debt and interest towards multilateral and bilateral creditors.

In QIV of 2017, the structure of domestic debt was somehow changed: compared with the respective period of the previous year, the share of 2-year and 5-year treasury bonds increased (1.2 and 1.6 percentage points respectively); while the share of so-called “historical debt” – decreased 2.2 percentage points.

In the analyzed period, a high annual rise of domestic debt (11.5 percent) was observed, which could be explained by the increase of volume of 2-year, 5-year and 10-year treasury bonds.

In QIV of 2017, the increase of expenses of the state domestic debt compared with the corresponding period of the previous year compiled 35.4 percent, which is caused by a 40 percent increase of sources directed to covering principal amount of debt.

17

4. Infl ation

Table 4.1: Change in Prices

Consumer price index

2009=100(end of period)

Change of consumer price index (%, last month compared with the last month

of previous period)

Annual inflation(average of period)

Core inflation (Average of period)

2012 15.2 -1.4 -0.9 1.32013 14.6 2.4 -0.5 0.32014 18.1 1.9 3.1 2.02015 22.8 4.9 4.0 5.72016 25.4 1.8 2.1 3.6

Q1 26.1 0.7 5.1 6.7Q2 23.7 -1.9 2.1 3.9Q3 24.7 0.8 0.9 2.4Q4 27.5 2.2 0.6 1.2

2017 33.0 6.7 6.0 4.0Q1 32.9 4.2 4.9 3.0Q2 32.5 -0.3 6.6 3.9Q3 32.4 0.0 6.0 4.4Q4 36.0 2.7 6.7 4.7


In QIV of 2017, inflation level stood at 6.7 percent, compared with the respective period of the previous year, which exceeded the targeted annual inflation by 2.7 percentage points.

In the analyzed period, annual inflation was significantly affected by the increase in prices of alcohol and tobacco - more than three times higher than the average consumer price increase (18.1 percent), which was caused by rise of excise tax on these products. A 15.1 percent increase of the price on transport services, on the one hand was preconditioned by rise of excise tax on fuel and on the other hand by increase of world prices on fuel, also “significantly” contributed to annual inflation. From August 2017, increase of the price of gas was added as one-off factor due to which the prices of goods and services of the respective group increased by 2.2 percent.

In QIV of 2017, the annual inflation was mostly affected by a 7.4 percent rise of food prices: vegetables became more expensive by 24.9 percent, meat and meat products – by 9.3 percent, due to the increase of export of cattle; price of the products included in the subgroup of milk, cheese and eggs increased by 9.7 percent, and of fruit – by 11.8 percent. Substantial rise of fruit and vegetable prices was mostly caused by basic effect – in 2016, fruit and vegetable prices decreased significantly.

In the analysis period, the increase of the prices of non-durable goods had a leading role in annual inflation, the rate of which (10.1 percent) substantially exceeded the average increase rate of consumer prices. The rate of increase of prices on durable goods and services was 2 and more times lower than of nondurable goods. As for annual increase of prices of midterm use goods and services, it compiled just 0.5 percent.

6.6910.12

0.512.84

3.2118.13

-1.542.19

3.516.77

15.11-1.03

0.811.50

3.833.97

7.404.02

7.821.42

9.284.26

9.747.13

11.7924.93

0.322.72

-5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00

TotalShort term good

Middle term goodsLong term goods

ServicesAlcoholic beverages and tobacco

Clothing and footwearHousing, water, electricity, gas and other fuels

Furnishings, household equipment and routine maintenance of the houseHealth

TransportCommunication

Recreation and cultureEducation

Restaurants and hotelsMiscellaneous goods and services

Food and non-alcoholic beveragesNon-alcoholic beverages

FoodBread and bread products

Meat and meat productsFish and fish productsMilk, cheese and eggs

Oil and fatsFruit, grape

vegetables, potatoSugar, jam, honey, confectionery products

Other food

Chart 16: percentage changes of consumer prices in Q IV of 2017 compared to respective periond of 2016 bay main groups of goods and services

Source: National Statistics Office of Georgia (GeoStat)

18

In QIV of 2017, due to high prices of food and energy, core inflation was lower than the general inflation indicator and compared with the corresponding period of the previous year stood at 4.7 percent, out of which 2 percentage points were ac-counted for by tobacco products.

3.9 4.4

4.7

6.66.0

6.7

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

05Q

105

Q2

05Q

305

Q4

06Q

106

Q2

06Q

306

Q4

07Q

107

Q2

07Q

307

Q4

08Q

108

Q2

08Q

308

Q4

09Q

109

Q2

09Q

309

Q4

10Q

110

Q2

10Q

310

Q4

11Q

111

Q2

11Q

311

Q4

12Q

112

Q2

12Q

312

Q4

13Q

113

Q2

13Q

313

Q4

14Q

114

Q2

14Q

314

Q4

15Q

115

Q2

15Q

315

Q4

16Q

116

Q2

16Q

316

Q4

17Q

117

Q2

17Q

317

Q4

Chart 17: Annual change of prices in 2005-2017: quarterly dynamic (percent)

Core inflation Consumer price index


In the analyzed period, an especially high rate of annual inflation (11 percent) was observed on imported goods, which exceeded the overall inflation indicator by 4.3 percent. An increase in the price of fuel and tobacco products accounts for a fair amount of liability in explaining this. Annual inflation on locally produced products was 4.9 percent.

19

5. Foreign Trade

Table 5.1: Dynamics of Foreign Trade Indicators

Trad

e tu

rnov

er(m

ln. U

SD)

Exp

ort (

mln

. USD

)

Impo

rt (m

ln. U

SD)

Trad

e B

alan

ce(m

ln. U

SD)

5 la

rges

t com

mod

ity g

roup

shar

e in

exp

ort

(%)

5 la

rges

t com

mod

ity g

roup

shar

e in

im

port

(%)

5 la

rges

t tra

de p

artn

er

coun

try

shar

e in

exp

ort (

%)

5 la

rges

t tra

de p

artn

er

coun

try

shar

e in

impo

rt (%

)

5 la

rges

t com

mod

ity

grou

p sh

are

in tr

ade

turn

over

(%)

5 la

rges

t tra

de p

artn

er

coun

try

shar

e in

trad

e tu

rnov

er (%

)

2012 10433 2377 8056 -5680 50 30 60 49 30 482013 10933 2910 8023 -5112 50 31 57 48 31 472014 11463 2861 8602 -5741 51 30 55 49 30 482015 9505 2205 7300 -5096 44 28 45 48 28 462016 9408 2113 7295 -5181 45 28 43 49 28 46

Q1 1931 443 1489 -1046 46 29 46 52 30 49Q2 2316 506 1810 -1305 43 25 43 49 25 46Q3 2505 564 1941 -1377 46 26 43 45 27 43Q4 2656 601 2055 -1454 44 30 43 49 29 46

2017 10710 2728 7982 -5254 47 28 48 50 21 33Q1 2290 577 1713 -1137 48 31 46 49 31 47Q2 2538 658 1880 -1223 48 27 51 47 29 47Q3 2747 706 2041 -1335 45 27 46 47 29 46Q4 3135 788 2348 -1560 46 27 50 54 28 53


In QIV of 2017, the volume of Georgia's trade turnover increased by 18 percent compared with the respective period of the previous year. 25 percent of trade turnover occurred with EU countries, which is by 6 percentage points less than the indicator of the same period of the previous year. The share of CIS countries in trade turnover increased by 3 percentage points, compared with the indicators of the corresponding period of the previous year and compiled 36 percent. The share of trade turnover with the rest of the world was 39 percent, which also exceeds the corresponding indicator of QIV of 2016 by 3 percentage points.

Despite the sharp fluctuation in trade turnover volume within the quarterly period, in general, the trend was still increasing in 2004-2017. The trade turnover with EU and CIS countries increased at a similar rate, while the pace of increase of trade turnover with the rest of the world was almost 2 times higher than the rate of increase of trade turnover with the two mentioned groups of countries.

424

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Chart 18: Quarterly dynamic and regional structure of total trade turnover (mln. USD)

EU countries CIS countries Other countries Total Turnover


In the analyzed period, the total volume of export increased by 31 percent compared with the respective period of the previous year. The commodity group of copper ores and concentrates especially highly (22 percent) contributed to the increase

20

of export. Increase in the volume of re-exported cars was also important (21 percent of total increase of export). Commodity groups of tobacco products and ferroalloys also made substantial contributions (11 percent each) to the increase of export. The share of natural wines of grape, Ethyl alcohol and mineral fertilizers was also significant (8-8 percent and 5 percent respectively).

In QIV of 2017, the structure of the five biggest export commodity groups was somewhat changed compared with the corresponding period of the previous year: ethyl alcohol, substituted by nuts, is no longer in the top five. The distribution of the types of leading export products is also changed.

Table 5.2: Five Biggest Export Commodity Groups

The biggest commodity groups in QIV of 2016 Thousand USD % The biggest commodity groups in QIV of 2017 Thousand

USD %

Copper ores and concentrates 69568 12 Copper ores and concentrates 110085 14Cars 62906 10 Fresh or dried nuts 85525 11Ferroalloys 48827 8 Ferroalloys 69686 9Grapes natural wines 45686 8 Cars 54939 7Ethyl alcohol 39152 7 Grapes natural wines 46018 6


It is worth noting that the weight of the top five export categories decreased from 61 to 34 percent in the respective period of the previous year, which against the background of 31 percent annual increase of export, points to its diversification. In 2004-2017, ferroalloys, cars, copper ores and concentrates, nuts, scrap, wine and mineral fertilizers were often represented among the top five export commodities; aircrafts, ethyl alcohol and medications were rather rarely but still sometimes seen in the top five.*

3.4292.821

2.2321.3751.357

0.9290.857

0.7680.482

0.1960.179

0.1070.0890.0710.0540.0360.018

0.000 0.500 1.000 1.500 2.000 2.500 3.000 3.500 4.000

Ferro-alloysMotor cars

Copper ores and concentratesHazelnuts and other nuts

Ferrous waste and scrapUnwrought or semi-manufactured gold

Wine of fresh grapesMineral or chemical fertilizers

AircraftsEthyl spirits

Medicaments put up in measured dosesMineral and natural waters

Sugar and chemically pure sucroseCement

Crude petroleum and petroleum oilsMixed goods

Fresh or dried citrus fruit

Chart 19: Average frequency of getting among the top five exporting goods by the quarters of 2004-2017


The list of products included relatively frequently in the list of the biggest commodity group of export products points to an unfavorable structure of the Georgian economy: out of 9 types of such products just four (ferroalloys, wine, mineral fertilizers and aircrafts) had an industrial profile. It is noteworthy that the cars, regularly included in the top five export goods, are not produced in Georgia.

In QIV of 2017, the biggest partner country in export was the Russian Federation, with 15 percent – 3 percentage points more than in the respective period of the previous year. The annual increase of volume of export to this country was almost 63 percent. The second leading partner in export was Azerbaijan, the share of which in total export increased by 3 percentage points compared with the respective period of the previous year and compiled 13 percent. The volume of export to this country increased by 76 percent in annual terms. Notably, in the corresponding period of the previous year, the two leading positions were also occupied by the two mentioned countries. Compared with QIV of 2016, Armenia and Bulgaria changed places in the top five for export, while Germany was substituted by Ukraine.

* For the purpose of analysing the quality of diversification of export and import, we took the dynamics of export and import in 2004-2017 in quarterly perspective and in each quarter identified the top five according to commodity groups as well as to the partner countries. Then we assigned a rating score to each group, based on a five points scale and calculated the rating of commodity groups and partner countries included in the top five in 56 quarters of the years 2004-2017.

21

Table 5.3: Five Leading Export Trade Partner Countries

Top five partner countries in export in QIV of 2016 Thousand USD % Top five partner countries in export in QIV of 2017 Thousand

USD %

Russia 74223 12 Russia 120750 15Azerbaijan 59289 10 Azerbaijan 104385 13Bulgaria 51740 9 Armenia 62070 8Armenia 36629 6 Bulgaria 52054 7Germany 34244 6 Ukraine 51824 7


Azerbaijan, Turkey, Armenia and Russia were almost always among the biggest export partner countries of Georgia from 2004-2017; while the USA, Bulgaria, Ukraine, Turkmenistan, Canada and China where relatively rarely seen. It is noteworthy, that the indicator of Russia being among the trade partners of Georgia in export significantly increased in recent years, as a result of which the country occupied the leading position.

3.536

3.250

2.232

1.804

1.054

0.875

0.750

0.500

0.446

0.304

0.089

0.054

0.054

0.054

0.000 0.500 1.000 1.500 2.000 2.500 3.000 3.500 4.000

Azerbaijan

Turkey

Armenia

Russia

USA

Bulgaria

Ukraine

Turkmenistan

Canada

China

Kazakhstan

Germany

Switzerland

UK

Chart 20: Average frequency of getting among the top five trade partner countries in export by the quarters of 2004-2017


In QIV of 2017, the total volume of import increased by 14 percent in annual terms. The products of aircrafts group had the biggest share in annual increase of import (almost 15 percent). The contribution of copper ores and concentrates, computers and medicines was also important (7.8 percent, 6.2 percent and 5.7 percent respectively).

In the analyzed period, as in the corresponding period of the previous year, oil and oil products held leading position in import commodity structure, however the volume of import of this group insignificantly decreased in annual perspective, and the weight was decreased by 1 percentage point.

The top five commodity groups by import is in fact unchanged compared with the respective period of the previous year, except for substitution of copper ores and concentrates group by the group of telephone devices. The arrangement of the top five leaders was also substantially unchanged.

Table 5.4: Five Biggest Commodity Groups by Import

The biggest commodity groups in QIV of 2016 Thousand USD % The biggest commodity groups in QIV of 2017 Thousand

USD %

Oil and oil products 209587 10 Oil and oil products 207021 9Cars 131709 6 Cars 135052 6Petroleum gases and other gaseous hydrocarbons 123119 6 Petroleum gases and other gaseous hydrocarbons 133653 6Medicines 99913 5 Medicines 83333 4Copper ores and concentrates 79374 4 Telephone devices 62178 3


In 2004-2014 the first four of the top five import commodity groups was always leading in the list of imported goods. Together with the mentioned groups, wheat also had an important position in import structure.

22

4.8573.875

2.0361.929

0.7680.446

0.3040.214

0.1430.1070.1070.0710.0710.0540.018

0.000 1.000 2.000 3.000 4.000 5.000 6.000

Petroleum and petroleum oilsMotor cars

Petroleum gases and other gaseous hydrocarbonsMedicaments put up in measured doses

Wheat and meslinMixed goods

Copper ores and concentratesTelephone sets, including cellular telephones

Tubes and pipesSugar

Turbojet and turbo-propellersRadio-tele transmission apparatus

AircraftsBars and rods of iron

Electrical energy

Chart 21: Average frequency of getting among the top five importing goods by the quarters of 2004-2017


In QIV 2017, as well as in the respective period of the previous year, the leading partner country by import was Turkey (18 percent of total import). Import from this country increased by 19 percent, while the share of total import – by one percentage unit. The Russian Federation, like in QIV of 2016, occupied second place. In general, the composition of the top five was not changed, just rearranged: China moved from fifth position to third, Azerbaijan moved from third to second place and Ukraine moved from fourth to fifth.

Table 5.5: Five Leading Partner Countries by Import

Top five partner countries in import in QIV of 2016 Thousand USD % Top five partner countries in import in QIV of 2017 Thousand

USD %

Turkey 354434 17 Turkey 421812 18

Russia 194356 9 Russia 256577 11

Azerbaijan 185791 9 China 252226 11

Ukraine 136070 7 Azerbaijan 210492 9

China 134777 7 Ukraine 130281 6Source: National Statistics Office of Georgia (GeoStat) and calculation of the group of authors

From 2004-2017, Turkey was unquestionably the leader among trade partners by import. It is almost always in first place. Russia and Azerbaijan also used to be frequently included in the top five, followed by Ukraine, China and Germany. United Kingdom, USA and Bulgaria were quite rarely seen in the top fifth.

23

4.804

2.571

2.536

2.232

1.375

1.196

0.125

0.125

0.036

0.000 1.000 2.000 3.000 4.000 5.000 6.000

Turkey

Russia

Azerbaijan

Ukraine

China

Germany

UK

USA

Bulgaria

Chart 22: Average frequency of getting among the top five trade partner countries in import by the quarters of 2004-2017


In QIV of 2017, the negative balance of trade increased by 7 percent, compared with the corresponding period of the previous year. It is noteworthy that this indicator worsened throughout 2017, which was preconditioned by a sharp increase of import compared with export.

From 2004-2017, the average import growth rate was 4.9 per quarter, while for export this indicator compiled 5.9 percent, meaning that export was growing on average 1.2 times faster than import. However, the volume of import exceeds that of export so much that this at first glance big difference in fact does not change the picture: despite fluctuations, trade balance in general demonstrates an irreversible worsening trend (by average 5.2 percent per quarter), the change of which is only possible by means of systemic structural changes.

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Chart 23: Quarterly dynamic of total import, export and trade balance (thousand USD)

Import Export Balance Import trend Export trend Balance trend


In the analyzed period, the current account deficit of the balance of payments was 530.9 million USD (13 percent of quarterly GDP), which is 19 percent less than the corresponding indicator of QIV in 2016. Significant improvement of the current account balance in annual perspective was preconditioned by a relatively moderate increase of negative trade balance of goods (6.4 percent), which partially was neutralized by a sharp improvement in the trade balance of services (almost 16 percent).

24

6. Foreign Direct Investment

Table 6.1: Dynamics of foreign direct investments (mln. USD)

For

eign

Dire

ct

Inve

stm

ents

(FD

I)

tota

l

Among them Among them Among them

EU C

ount

ries

CIS

C

ount

ries

Rem

aini

ng

coun

trie

s

Agr

icul

ture

Indu

stry

and

C

onst

ruct

ion

Rea

l Est

ate

Fina

ncia

l se

ctor

Rem

aini

ng

sect

ors

Tbili

si

Rem

aind

er o

f th

e co

untr

y

2012 1022.9 457.3 98.6 403.6 16.1 479.7 56.9 162.3 308.0 767.7 255.22013 1020.6 421.1 144.4 393.5 13.0 475.2 62.3 174.4 295.7 742.3 278.32014 1818.0 838.5 457.0 628.7 12.3 771.7 149.6 126.6 757.8 1367.0 451.02015 1652.5 728.3 632.5 245.2 18.6 453.6 90.1 190.0 900.2 1315.2 337.32016 1602.9 382.0 621.7 561.0 8.3 433.6 95.2 153.9 911.8 1374.4 228.4

Q1 408.0 114.8 143.8 149.6 2.2 58.3 43.8 63.4 240.3 292.6 115.4Q2 414.6 156.6 154.4 103.7 -0.7 95.6 4.0 61.1 254.7 377.1 37.5Q3 517.1 153.0 162.2 211.3 2.1 185.3 24.9 56.2 248.6 425.4 91.8Q4 263.1 42.4 161.3 144.2 4.8 94.4 22.5 -26.7 168.2 279.3 -16.3

2017* 1861.9 733.0 522.8 602.9 3.6 611.9 159.8 304.3 782.3 1456.9 405.0Q1 416.4 137.3 108.0 171.1 1.2 78.7 82.0 78.1 176.4 345.6 70.7Q2 347.7 123.9 133.2 110.7 3.9 112.7 17.5 4.2 209.5 295.6 52.2Q3 600.4 190.7 171.6 238.1 5.4 241.9 21.9 73.5 257.7 401.5 198.9

Q4 497.4 281.1 110.0 106.2 -7.0 178.5 38.5 148.6 138.8 414.2 83.2Source: National Statistics Office of Georgia (GeoStat) Note: *Preliminary data

In QIV of 2017, the volume of Foreign Direct Investments almost doubled compared with the respective period of the previous year (increased by 90 percent), however compared with the previous quarter, when the mentioned indicator reached the highest benchmark, it decreased by 17 percent.

In the analyzed period, EU countries accounted for 57 percent of FDI, CIS countries – 22 percent and 21 percent for the rest of the world. The structure of Foreign Direct Investments does not demonstrate a long term, established trend in this regard, due to great fluctuations (see the Chart 24).

The same could be said of the long term dynamics of FDI in the quarterly perspective: a sharp rising trend from 2005-2008, ended in a sharp fall in QIII of 2008, after which it was stabilized and reached its next peak in QIII of 2014. Afterwards, the quarterly fluctuation increased, however, the peaks are still met (for example QIII of 2017). The peaks of Foreign Direct Investments normally are observed in QII and QIII, which could be explained by the nature of FDI planning and implementation.

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Q317

Q417

Chart 24: Quarterly dynamic and structure of FDI by origin (mln. USD)

EU countries CIS countries Other countries Investment, total


25

With the purpose of analyzing the structure of leading investor countries in QIV of 2017, it would be interesting to compare them with the structure of cumulative volume of FDI by investor countries.

In the analyzed period, the biggest investor country was Azerbaijan, to which more than fifth of Foreign Direct Investments implemented in Georgia in QIV of 2017 was accounted. From 2005-2017, the majority of FDI came from this country - 15 percent of the cumulative volume.

In QIV of 2017, the second place was occupied by the Czech Republic - 20 percent of Foreign Direct Investments. In the cumulative structure of FDI made in 2005-2017, Check Republic was not a leading investor country, however, is included in the top ten.

Table 6.2: Top fi ve countries by the volume of FDI2005-2017 Mln. USD % QIV of 2017 Mln. USD %

Total investments 16565 100 Total investments 497 100

Azerbaijan 2485 15 Azerbaijan 104 21

Netherlands 2283 14 Check Republic 100 20

United Kingdom 1871 11 Netherlands 90 18

Turkey 1544 9 United Kingdom 76 15

USA 1262 8 Luxemburg 26 5

Other 7118 43 Other 101 20Source: National Statistics Office of Georgia (GeoStat) and the calculation of the group of authors

In QIV of 2017, the Netherlands occupied the third position among investors – 18 percent of FDI. From 2005-2017, this country had second position by total volume of investments, with 14 percent of cumulative volume.

Fourth place was occupied by the United Kingdom with 15 percent of FDI. From 2005-2017, Great Britain was in third position in the cumulative structure of implemented investments, with 11 percent of total volume.

In the analyzed period, the fifth biggest investor was Luxemburg with 5 percent of FDI. In 2005-2017, this country was not in the top five by total volume of investments made in Georgia, however, periodically in some quarters it was observed among leading investors (see the Chart 25.)

Thus, in QIV of 2017 three of the top five biggest investors in Georgia (Netherlands, Azerbaijan, and United Kingdom) were the top three biggest investors according to total data of FDI in 2005-2017. According to this data, fourth position was occupied by Turkey and fifth – by the USA.

The list of investor countries of Georgia by appearance in the top five with the volume of direct investments, is given below.*

2.462

2.077 2.0001.808

1.404

0.7310.558 0.519 0.481 0.462 0.423 0.385 0.288 0.269 0.192 0.135 0.135 0.115 0.077 0.077 0.058 0.058 0.058 0.058 0.058 0.038 0.038 0.038

0.000

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Net

herl

and

Aze

rbai

jan

UK

Turk

ey

USA

UA

E

Czec

h R

epub

lic

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us

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gini

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(UK

)

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n

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a

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rg

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ma

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mar

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man

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e

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ce

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way

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tria

Ital

y

Mal

ta

Switz

erla

nd

Egyp

t

Slov

akia

Sout

h K

orea

Saud

i Ara

bia

Chart 25: Average frequency of getting among the top five investor countries by the quarters of 2005-2017

Source: National Statistics Office of Georgia (GeoStat) and the calculation of the group of authors

* For the purpose of analyzing diversification of FDI by countries, we took the volume of Foreign Direct Investments made in 2005-2017 by countries in quarterly perspective and identified the top five countries in each quarter. Then with five-point scale we assigned the rating score to each country and calculated the rating of investor countries appeared in the top five in 52 quarters of 2005-2017.

26

The Netherlands is the most frequently seen among the investors. The investment regime in this country is quite favorable and is close to offshore practice. It is noteworthy that the total rating of investor countries with offshore or close to that (excluding Netherlands) regimes compiles 1.75, which means that the frequency of being Georgia’s investor is almost equal to the fourth investor country by size and frequency – Turkey.

In QIV of 2017, about 30 percent of FDI was accounted for by the financial sector, which is much less than the share of this sector in terms of cumulative volume of Foreign Direct Investments made in Georgia from 2007-2017 (11 percent). *

However by frequency of distribution of foreign investments in 5 leading sectors, this sector is in the third position (see the Chart 26)**.

In the analyzed period, the energy sector occupied the second position by volume of foreign investments, with 19 percent share. From 2007-2017 this sector had 13 percent share in total volume of FDI in Georgia, meaning that it occupies the second position in this regard as well. The energy sector also occupies the second position by appearing in the top 5 sectors by distribution of foreign investments. All this points to the fact that energy remains a subject of high interest for foreign investors.

In QIV of 2017, the transport and communication sector was in third position by FDI amount, with 16 percent share. It is to be noted that from 2007-2017, this sector, with 24 percent share in terms of cumulative structure of the direct investments made in Georgia, occupied first place. It has the leading position in terms of allocation of investments and also in terms of frequency of appearing in the 5 leading FDI sectors. Thus, it could be noted that transport and communication is one of key sectors of the Georgian economy, in terms of attracting foreign investments.

Table 6.3: Sectorial distribution of FDI 2007-2017 Mln. USD % QIV of 2017 Mln. USD %

Total investments 14941 100 Total investments 497 100

Agriculture, fishery 146 1 Agriculture, fishery -7 -1

Mining industry 532 4 Mining industry 15 3

Manufacturing industry 1710 11 Manufacturing industry 17 3

Energy 1907 13 Energy 95 19

Construction 1480 10 Construction 52 10

Hotels and restaurants 939 6 Hotels and restaurants 12 2

Transport and communication 3630 24 Transport and communication 79 16

Healthcare and social assistance 202 1 Healthcare and social assistance 5 1

Real estate 1324 9 Real estate 38 8

Financial sector 1600 11 Financial sector 149 30

Other sectors 1470 10 Other sectors 43 9Source: National Statistics Office of Georgia (GeoStat) and the calculation of the group of authors

In the analyzed period, 10 percent of Foreign Direct Investments was made to the construction sector (fourth place). It had the same share and position in total volume of FDI made to Georgia in 2007-2017. Compared with three previous sectors, the frequency of appearing in the top 5 sectors by allocation of direct foreign investments is much less.

In QIV of 2017, the share of manufacturing industry in total volume of FDI was very small (3 percent), while from 2007-2017 its share compiled 11 percent in cumulative structure of investments made to Georgia and occupied third position by amount. The manufacturing industry’s frequency of appearing in the top five sectors by allocation of foreign investments was high as well.

In the analyzed period, no foreign investment was implemented in agriculture. In 2007-2017, its share in total volume of the investments made to Georgia compiled 1 percent, and the frequency of appearing in the top 5 sectors by allocation of foreign investments in fact was zero.

In QIV of 2017, the share of Foreign Direct Investments made to the hotel and restaurant sector compiled 2 percent. This sector did not have a high share in terms of cumulative structure of FDI made to Georgia in 2007-2017 – 6 percent. The frequency of appearing in the top five sectors by allocation of direct foreign investments was also low.

* The data disaggregated by this feature are available since 2007 and the analyzed period is 2007-2017 respectively. ** For the purpose of analyzing distribution of FDI by sectors, we took the volume of Foreign Direct Investments made in 2007-2017 by sectors in quarterly perspective and identified the top five in each quarter. Then with five-point scale we assigned the rating score to each sector and calculated the rating of invested sectors appeared in the top five in 44 quarters of 2007-2017.

27

3.159

2.182

2.068

1.932

1.705

1.409

1.409

0.682

0.273

0.182

0.000 0.500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 5.000

Transport and communication

Energetic

Financial sector

Manufacturing industry

Other Sectors

Construction

Real estate

Hotels and restaurants

Mining industry

Health care and social services

Chart 26: Average frequency of getting among the top five invested sectors by the quarters of 2007-2017

;Source: National Statistics Office of Georgia (GeoStat) and the calculation of the group of authors

The regional distribution of FDI in the analyzed period demonstrates that 83 percent is accounted for by Tbilisi. From 2007-2017, its share in terms of total volume of investments made to Georgia compiled 75 percent. Imereti, Racha – Lechkhumi and Kvemo Svaneti taken together occupy the second position with a 6 percent share. From 2007-2017, the share of these regions did not exceed 3 percent.

Table 6.4: Regional distribution of FDI 2009-2017 Mln. USD % QIV of 2017 Mln.USD %

Total 11618 100 Total 497 100

Tbilisi 8742 75 Tbilisi 414 83

Adjara 1051 9 Adjara 23 5

Kakheti 72 1 Kakheti 2 0

Samtskhe - Javakheti 302 3 Samtskhe – Javakheti 7 1

Kvemo Kartli 495 4 Kvemo Kartli 4 1

Samegrelo- Zemo Svaneti and Guria 551 5 Samegrelo Zemo Svaneti and Guria 24 5

Imereti, Racha Lechkhumi and Kvemo Svaneti 364 3 Imereti, Racha Lechkhumi and Kvemo Svaneti 32 6

Shida Kartli and Mtskheta Mtianeti 43 0 Shida Kartli and Mtskheta Mtianeti -8 -2Source: National Statistics Office of Georgia (GeoStat) and the calculation of the group of authors

Adjara occupied the third position, with 5 percent share. It is to be noted that the share of this region from 2007-2017 compiled 9 percent, occupying second position. 5 percent of total FDI was made to Samegrelo – Zemo Svaneti and Guria. These regions, together with Adjara, shared third position in QIV of 2017. It is noteworthy that the share of these regions taken together in 2007-2017 compiled 5 percent of the cumulative structure of the investments made to Georgia and they occupied third position after Adjara.

28

7. Banking Sector

Table 7.1: Dynamics of total assets and liabilities of commercial banks (Mln. GEL by the end of period)

Total assets Total assets (GDP %)

Loans allocated to business sector and households Non-bank deposits Borrowed funds Equity capital

2012 13103.1 54.9 8323.3 7649.9 2616.1 2313.32013 14931.6 64.3 9163.7 9664.6 2895.3 2612.92014 18320.7 70.7 11109.6 11617.1 3573.2 3210.72015 23407.4 79.2 14735.5 14346.8 4483.1 3585.12016 25274.4 54.9 16378.5 16991.0 4064.5 3687.9

Q1 24727.2 44.2 15949.0 14271.4 4146.8 3549.0Q2 25274.4 43.8 16378.5 14338.1 4064.5 3687.9Q3 25987.1 44.7 16491.0 14898.5 5317.1 3834.7Q4 30149.3 49.9 18902.1 16991.0 6689.5 3978.2

2017 30287.7 52.0 19315.9 19782.0 6693.9 3997.1Q1 29751.1 46.0 18803.3 16069.1 6611.8 4308.0Q2 30287.7 46.9 19315.9 16838.8 6693.9 3997.1Q3 32312.5 49.7 20249.4 18348.8 7054.5 4212.5Q4 34593.5 52.0 22281.5 19782.0 7560.8 4434.7

Source: National Bank of Georgia

At the end of QIV of 2017, the total assets of the banking sector of Georgia increased by 15 percent compared with the respective period of the previous year, and – by 7.1 percent compared with the end of the previous quarter. Annual as well as quarterly dynamics of total assets were preconditioned by loans issued to the business sectors and households, the weight of which in the total assets was 64.4 percent.

The annual and quarterly increase of total liabilities of commercial banks at the end of analyzed period, was mostly preconditioned by an increase of non-bank deposits and borrowed funds. The rate of increase of non-bank deposits compiled 16.4 percent compared with the respective period of the previous year, while the increase of borrowed funds – almost 22 percent.

By the end of QIV of 2017, the total equity capital of the banking sector increased by 11.5 percent compared with the respective period of the previous year, while compared with the previous quarter – by 5.3 percent. The annual and quarterly increase of this indicator was preconditioned by a high rate of unshared profit distribution, especially from the annual perspective, when it reached almost 36 percent.

Table 7.2: Deposits and loans of commercial banks (mln. GEL by the end of period) Non-bank deposits Loans

Total In national currency

In foreign currency

Dollarization (%) Total In national

currency In foreign currency

Dollarization (%)

2012 7649.9 2748.2 4901.6 64.1 8712.1 2820.7 5891.4 67.62013 9664.6 3880.4 5784.2 59.8 10469.9 3926.1 6543.8 62.52014 11617.1 4628.8 6988.2 60.2 12965.7 5077.2 7888.5 60.82015 14346.8 4380.3 9966.5 69.5 16013.4 5671.5 10341.9 64.82016 16991.0 4863.5 12127.5 71.4 18907.4 6533.4 12374.0 65.4

Q1 14271.4 4166.2 10105.3 70.8 15949.0 5572.8 10376.2 65.1Q2 14338.1 4695.5 9642.6 67.3 16378.5 5649.8 10728.7 65.5Q3 14898.5 4590.5 10308.0 69.2 16491.0 6020.6 10470.5 63.5Q4 16991.0 4863.5 12127.5 71.4 18907.4 6533.4 12374.0 65.4

2017 19782.0 6813.1 12969.0 65.6 22281.5 9558.2 12723.3 57.0Q1 16069.1 4951.0 11118.1 69.2 18378.9 7180.9 11198.1 60.9Q2 16838.8 5465.7 11373.1 67.5 19344.3 8110.7 11233.6 58.1Q3 18348.8 6358.3 11990.5 65.3 20290.5 8792.6 11497.9 56.7Q4 19782.0 6813.1 12969.0 65.6 22281.5 9558.2 12723.3 57.1


At the end of the analyzed period, a high rate of annual increase of non-bank deposits of commercial banks (16.4 percent) was ensured by an impressive – 40.1 percent increase of deposits denominated in the national currency, while the rate of increase of deposits in a foreign currency was 6.9 percent. The picture was different from the quarterly perspective, where the growth rates of deposits denominated in national and foreign currencies became almost equal (8.2 percent and 7.2 percent respectively).

Due to above mentioned, the structure of non-bank deposits of commercial banks significantly changed. The share of deposits denominated in the national currency increased by 6 percentage points, compared with the respective period of the previous year, after which the indicator of dollarization decreased significantly – from 71.4 percent to 65.6 percent.

29

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Chart 27: Quarterly dynamic of non bank deposits (mln. GEL)

Deposits in national currency Deposits in foreign currency Deposits, total


At the end of the analyzed period, the rising dynamics of non-banking and bank deposits in national currency, compared with the corresponding period of the previous year, were preconditioned by a relatively sharp increase (64 percent) of term deposits, when total balance accrued to current accounts and on demand deposits increased by 26 percent. As for the deposits in foreign currency, their annual growth was mostly caused by the increase of balance on current accounts and on demand deposits.

By the end of QIV of 2017, average annual interest rate on deposits in national currency, placed in commercial banks increased insignificantly (7 percent) compared with the respective period of the previous year. The respective interest rate on the deposits in a foreign currency somehow decreased and compiled 2.6 percent. Compared with the end of the previous quarters, average annual interest rate on deposits in a foreign currency was unchanged, while the interest rates on deposits in the national currency decreased by 0.4 percentage points.

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Chart 28: Quarterly dynamic of the average annual interest rates of deposits (percent)

Average annual interest rate for deposits in commercial banks in national currency

Average annual interest rate for deposits in commercial banks in foreing currency


At the end of analyzed period, the volume of loans issued by commercial banks increased significantly (by 17.8 percent), compared with the same period of the previous year, which was preconditioned by sharp annual increase (46.3 percent) of loans issued in the national currency, while the increase of loans issued in a foreign currency compiled 2.8 percent.

30

Quarterly growth of banking sector loans was also significant (9.8 percent), however in this case the difference between the increased rates of the loans issued in national and foreign currencies was just 2 percent.

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Chart 29: Quarterly dynamic of loans (mln. GEL)

Loans in national currency Loans in foreign currency Loans, total


At the end of QIV of 2017, preceded growth of loans issued in national currency, compared with the respective period of the previous year, caused a decrease of the loan dollarization indicator from 65.4 percent to 57.1 percent.

At the end of analyzed period, the industry and real estate operations sector was distinguished by especially high rate in annual growth of lending (29 and 25 percent respectively). Annual growth of lending to the hotels and restaurant sector (22 percent) was also quite significant. A relatively modest growth rate was observed in lending to construction (9.1 percent). Lending to the agriculture, forestry and fishery sector increased by 4.2 percent.

At the end of QIV of 2017, lending to the trade decreased by 3 percent, compared with the same period of the previous year; and lending of transport and communication decreased by 4 percent. The drop in lending volume was especially large in the financial mediation sector (23 percent).

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Chart 30: Quarterly dynamic and sectoral structure of bank credits (mln. GEL)

Agriculture, forestry and fishing Industry Construction

Trade Hotels and restaurants Other

Sectors, total


31

Due to the above mentioned, the sectoral structure of lending underwent certain changes compared with the end of QIV of 2016; in particular, the share of industry increased by almost 4 percentage points, and the share of real estate operations sector increased insignificantly (1.1 percentage points). The shares of hotels and restaurants and financial mediation sectors decreased by 3-3 percentage points. The share of the biggest sector in lending – trade – decreased by the same amount: 22.1 percent.

In QIV of 2017, annual growth of loans, issued to legal bodies, stood at almost 31 percent, which exceeds the corres-ponding indicator of lending natural bodies by 6 percent. The entire lending structure was significantly changed in this regard: the share of legal bodies decreased by 3 percentage points, while the share of natural bodies increased by the same amount. The high basic indicator of lending to legal bodies could explain this change.

In the end of the analyzed period, inactive loans - according to the criteria of National Bank of Georgia - compiled almost 6 percent of total loans, which was by 1.4 percentage points less then in the respective period of the previous year and by 0.6 percent less compared with the previous quarter.

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Chart 31: Quarterly dynamic of the average annual interest rates of loans (percent)

Average annual interest rate for loans in commercial banks in national currency

Average annual interest rate for loans in commercial banks in foreing currency


In QIV of 2017, the average annual interest rates of loans issued by commercial banks in national and foreign currency decreased compared with the same period of the previous year - by 0.2 and 0.9 percentage points respectively. 0.2 percentage points increase of average annual interest rates on the loans issued in national currency was revealed when the interest rate on loans issued in foreign currency decreased by 0.2 percentage points.

Quarterly Review of the Georgian Economy - GFSIS · 2018-05-11 · The Quarterly Review of the...

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