General effects

1.

Updated: May 4, 2020

The reliance of the Georgian economy on tourism

The reliance of the Georgian economy on tourism has increased significantly in the last couple of years. In 2019, tourism made up 8.1% of the Gross Domestic Product of Georgia.

(Source: National Tourism Administration)

Domestic tourism has a small role in the sector overall, and takes up a mere 27% (percent of local tourists in the total number of tourists staying at hotel-type accommodations). With these numbers, Georgia appears in the lower right corner of the graph (close to Greece). It is expected that the crisis will have a significant effect on the hotel industry and the economy in general for countries in the same category, and the recovery period will be extensive.

Domestic tourism relative to Tourism as a percentage of the economy, 2019
Significant impact on the hotel industry and economy, prolonged recovery
Significant impact on the hotel industry and economy, gradual recovery
Significant impact on the hotel industry but less on the economy, slow recovery
Significant impact on the hotel industry but less on the economy, faster recovery
Source: Colliers

2.

Updated: May 4, 2020

International tourists in Georgia

Georgia mainly receives tourists from its neighboring countries. Leading countries by the number of tourists in Georgia are Russia, Turkey, Armenia, Azerbaijan, Ukraine, and the EU countries collectively. In order to make an accurate estimate of future visitors to Georgia, the spread of the virus in said countries must be taken into consideration, as when these countries will be able to stop the spread of the virus.

International Tourists by Country, 2019.
Source: Geostat

3.

Updated: May 4, 2020

New target markets - Potential tourists corridors

Considering critical pandemic situation in our region, focusing of new target markets becomes urgent with which the opening of tourist corridors will be relatively safe. Georgia has already signed an agreement with Israel. Israel may be the first country from which Georgia will welcome tourists after flight bans are lifted. For comparison in 2019, 202 thousand tourist visits were made from Israel to Georgia.

On the illustration, we have put also other countries with which it is possible to develop tourist corridors. Their share in total tourist visits in 2019 was 7.5%.

Tourist Visits by Country, 2019
(7.5% of the total visitors)
Source: GNTA

4.

Updated: May 4, 2020

Daily infection rate in regional countries

At this moment, Georgia seems to be a leading country in the region in terms of deterring spread of the virus.

Daily confirmed COVID-19 cases hits up 10,000 in Russia and 1,200 in Turkey. However, Turkey seems to be more successful in managing the outbreak.

It is worth of mentioning that Armenia and Azerbaijan are still in the peak phase and cases in Iran are rising again.

Updated: May 21, 2020.

განმარტება: გასული დღეები იქიდან, რაც ინფიცირებულთა დღიურმა რაოდენობამ პირველად მიაღწია 30-ს

5.

Updated: May 4, 2020

Government response stringency index

This index simply records the number and strictness of government policies, and should not be interpreted as "scoring" the appropriateness or effectiveness of a country's response.

The Government Response Stringency Index is a composite measure based on nine response indicators including school closures, workplace closures, and travel bans, rescaled to a value from 0 to 100 (100 = strictest response).

According to the given chart, Georgia has taken the strictest measures in this period. Western countries stringency is dropped between 60-80 points.

Updated: May 21, 2020.


6.

Updated: May 4, 2020

Exposure of the economic sectors to COVID-19

Georgia’s economic sectors are exposed to the crisis on different scales. The Hotels, Food & Beverage, and Entertainment sectors are highly exposed, yet in total their share in the GDP amounts to just 10%. Trade (14%) and Construction & Development (8.6%) have a relatively larger share in the GDP; nevertheless, both also fall into the category of highly exposed sectors.

Gross Domestic Product, COVID-19 impact on Sectors, 2019
Very exposed
Exposed but not all
Some parts exposed, some parts fine (50/50)
Neutral / Limited impact
Should be more positive than negative
Source: Colliers, Geostat

7.

Updated: May 4, 2020

Expected decline in foreign direct investment (FDI)

According to the national statistics office, in 2019, foreign direct investment (FDI) slightly increased (by 0.2%) and amounted to $1,267.7 mln. 50% of the investments came from the UK, Turkey and Ireland (preliminary data, Geostat). The way the aforementioned countries plan to tackle the spread of Novel Coronavirus, and their investment strategies, will be critical for the future investment flow into Georgia.

The crisis of 2008-2009 had a negative impact on FDI inflows into Georgia, recording a 60% decrease compared to the previous year.

Largest Direct Investor Countries as of 2019, according to Preliminary Data, in million USD
Source: Geostat

8.

Updated: May 4, 2020

The influence of COVID-19 on direct foreign investment with regards to economic sectors

In 2019 (preliminary data), investments were made in the following sectors: Finance (20.6%), Electricity, Gas, Steam and Air Conditioning Supply (15.3%) and Hotels & Restaurants (12.4%). The Hotels & Restaurants and Construction sectors both fall into the “very exposed” category. In the period of isolation, it is expected that investments in the Hotels & Restaurants and Construction sectors will dramatically decrease.

Foreign Direct Investment by Largest Sectors in the Economy, Preliminary Data, 2019
Very exposed
Exposed but not all
Some parts exposed, some parts fine (50/50)
Neutral / Limited impact
Other
Source: Geostat

9.

Updated: May 4, 2020

The expected decline in remittances

According to the statistics of the National Bank of Georgia, in 2019 (Jan-Nov) the number of remittances in Georgia amounted to $1.56 billion, which is a 9.3% increase compared to the same period in the previous year. 60% of remittances came from Russia, Turkey and Italy. It is likely that the crisis will greatly affect the economies of the aforementioned countries, and in the short and midterm perspective, it will cause a logical and inevitable decline in remittances.

The effect of the 2008 recession saw remittances in 2009 decrease by 16% compared to the previous year.

Money Transfers by Country as of 2019, Thousand USD

10.

Updated: June 20, 2020

Currency depreciation percentage rate

The depreciation in value of the Georgian currency against the US Dollar, as well as other currencies in the region, continue to fluctuate. However, in line with restraining the spread of the virus in Georgia, the national currency has strengthened. Georgian Lari depreciated only by 3.1% against the US dollar compared to the beginning of January. As for other the countries of the region, most of them face severe epidemiological situation, which is reflected in depreciation of their national currencies too.


Update: June 8.

Depreciation of the national currency of Georgia and neighboring countries against the US Dollar, %
Jan 2020 - Jun 2020
Source: National Bank of Georgia, National Banks of neighboring countries

11.

Updated: June 20, 2020

Eastern European Real Estate Markets GOVERNMENT RESPONSE

Depth & breadth of national policy response
Source: Colliers






12.

The past couple weeks have seen positive trend for Eastern Europe with regard to recovery from COVID-19. The countries like Czechia, Hungary, Romania, Slovakia, and Georgia as well as Baltic states of Lithuania, Latvia and Estonia have had a marked improvement in terms of falling numbers of active COVID-19 cases. While Armenia, Azerbaijan, Bulgaria, Belarus, Moldova, Poland, and Russia still remain behind the ‘levelling-off curve’ in this regard.

Fiscal policies of most eastern European countries are characterized by supportive measures for small and medium enterprises that are adversely affected by the pandemic, cheap credits, credit guarantees, tax holidays for vulnerable sectors, subsidies for entities to finance their utilities, rents and salaries, lump-sum payments for unemployed citizens, etc.

13.

In terms of real estate, the vast majority of countries have focused their initial strategy on commercial real estate. Most of them allow the tenants of commercial spaces to postpone the payment of rent and utility bills if they are unable to exploit their rented premises due to the state of emergency. Evictions are also suspended till the end of the state of emergency. Some countries partially subsidize the rental payments or postpone the mortgage installments for small and medium enterprises.

14.

Unlike these countries, the residential real estate contributes to the bigger share in Georgian economy than commercial real estate. Thus, the policies introduced by the government respond to the needs of Georgian residential market and are directed towards facilitating their performance. Underwriting new mortgage loans, underwriting for completion and commissioning of the construction process, covering 4 percent of the interest rate on new residential mortgage loans by the government, will significantly support developers as well as individual buyers of residential properties willing to improve their living conditions.

Expectations and opportunities

Peak in Georgia
It has been 4 weeks since the 100th infected person was diagnosed in Georgia, and according to trends in other countries, the disease spread tends to peak at about 3-4 weeks. Respectively, it is probable that by the end of May the number of new infections will start to fall.
Next stage of the pandemic
If a cure for the virus is not found, it is expected that the virus will spread actively in the winter of 2020-2021. This means a second wave of mass self-isolation and further reduction of economic activity in the country.
The perspective of domestic tourism
Unlike tourism in general, in the short term, there are prospects for domestic tourism to flourish in August-October. Mountain and eco-tourism have high potential, which might result in an increase of motor transport on Georgian roads.