In March 2020, Georgian economy shrank by 2.7%
By Natalia Kochiashvili
Friday, May 1
The Georgian Statistics Office (Geostat) publishes a preliminary assessment of economic growth. According to the document, the economy shrank by 2.7% in March 2020 compared to the previous year, while the average growth in the first quarter was 1.5%.
It is noteworthy that the economic decline in Georgia has been recorded for the first time in several years. This is likely due to the impact of the Coronavirus global pandemic on Georgia's economy and the country's severe economic constraints. In March, imports fell by 13.4% and exports by 22% due to reduced foreign demand because of the influence of Coronavirus.
Compared to March of the previous year, the number of newly registered enterprises has sharply decreased. In March 2020, only 2,426 enterprises were registered, which is almost 50% less than in 2019. According to Geostat, the turnover of VAT-paying enterprises amounted to ?6.3 billion, which is only 0.7% more than in 2019.
The decline was observed in almost all sectors of the economy. Particularly noteworthy are the reduction in the sectors of hotels and restaurants, transport, art, entertainment and leisure, trade and manufacturing. The financial and insurance sector has also declined, mainly due to declining revenues from interest rates by banks.
However, as an exception, an increase compared to the previous year is observed in the construction, information and communication sectors. According to the director of Geostat, Gogita Todradze, the increase in construction was mainly due to infrastructure projects (roads, highways, bridges), which are mainly funded by the state. The increase in the information and communication sector was due to the increase in the demand for digital technologies.
In the first quarter of this year, exports fell 5.9% to $ 778.1 million.
In January-March 2020, exports from Georgia to China increased by 185.9% to $ 99.9 million, or 12.8% of total exports.
According to Geostat, despite the decline in export figures, the dynamics of exports in some countries is positive. These countries are Azerbaijan, China, Bulgaria, Switzerland and Spain.
In the first quarter of 2020, the total volume of real estate put into operation in Georgia decreased by 32.8%. During the first quarter of the year, the construction of 484 facilities was completed, which is 21.8% less, and the total area of these facilities is 419,700 square meters, which is 32.8% less than the previous year. According to Geostat, the average area of one facility put into operation in January-February is 867 square meters. As for the area of projects built by regions, 29% of it is concentrated in Tbilisi, followed by Kakheti with 12.6%.
As for the area of issued permits, 2285 construction permits were issued by municipalities in the first quarter of 2020, which is 11.4% more than in the previous year. If the projects are really implemented with these permits, then an additional 1,537,800 square meters of real estate will be created in the country.
According to Geostat, in the first quarter of 2020, $28 million 993 thousand were spent on electricity imports to Georgia, which is 25.7% more than in the same period last year. As for March data, this expenditure amounted to $8 million 171.8 thousand, which is 7.5% more than in March last year.
For reference, according to the Electricity Market Operator (ESCO), in March, compared to the same period last year, electricity imports increased by 4.3% and reached 217.9 million kWh. Imports were made from Russia and Azerbaijan.
According to Mariam Chakhvashvili, senior analyst and Galt & Taggart, this led to an almost 26% increase in the value of electricity imports in the first month of spring.
"Electricity imports increased both in March and in the first quarter of the year. Specifically in March, we can say that the share of Abkhazian consumption is quite significant, but in the first quarter is a significant effect of declining hydropower,” she said, adding that imports increased by about 40% in the first quarter and Engur-Vardnili total generation is reduced by 10%, which means that the consumption required for Abkhazia is largely imported.
According to Chakhvashvili, consumption in Abkhazia has increased by 8% and the fact that imports were a significant portion for Abkhazia is also confirmed by the fact that the average price of imports has decreased.
“If the average price of imports in January was 5 cents, in February and March the average price was 3.2 and 3.75 cents, which, despite the dollar exchange rate, is largely due to the fact that electricity was supplied from Salkhino,” Chakhvashvili explained.
Due to the fact that some economic activity was still observed at the beginning of March, and after the declaration of the state of emergency in the second half, the activity decreased almost completely, in April the Georgian economy is expected to decrease even more.
The International Monetary Fund, as well as the National Bank of Georgia, predicts a 4% decline in Georgia's economy in 2020.
