Foreign direct investment falls by 41.7% in the first quarter of 2020
By Natalia Kochiashvili
Wednesday, June 10
National Statistics Office, Geostat released the preliminary data on 9th of June regarding the foreign direct investment (FDI) in Georgia. FDI has reached $165.4 million in the first quarter of 2020, which is 41.7% decrease compared to the same period of last year.
The highest rate in the first quarter of 2017 ($411.7 million) was recorded in 2017. Since then, this figure has been declining every year: 2018 - $323.5 million, 2019 - $283.6 million.
“The main reasons for decreasing the FDI included completion of a pipeline project and transferring of ownership in some companies from non-resident to resident units,” Geostat noted.
The top 3 countries that invested the most in Georgia in Q1 of 2020 were United Kingdom (44%), United States (17%) and Panama (11.9%). Most of the FDI came from the United Kingdom – $73.1 million, followed by the United States – $28.1 million; Panama – $19.6 million; Denmark – $11.6 million; Netherlands – $11.2 million; Turkey – $11.1. million; Russia – $10.8 million.
Georgian Finance Minister Ivane Matchavariani said that the decline in FDIs as well as the 16 % decrease of the Georgian economy in April was caused by the coronavirus pandemic.
Georgian Economy Minister Natia Turnava said that the economy is shrinking around the world and also affects the Georgian economy.
“This year and the statistics we have in the first quarter of this year are not usual. The economy is shrinking and declining globally,” she said, adding that this will affect investors’ attitudes in general, not only towards Georgia, since when there’s uncertainty on the global markets, decisions about investments and new projects are harder. Thus, the minister says the decline in FDIs is caused by the pandemic.
Turnava emphasized that the Ministry of Economy is working to attract investments in 2021 and noted Enterprise Georgia which has a strategy to attract investments.
The financial sector received the largest share of FDI – $94.9 million, followed by the real estate sector – $34 million; hotels and restaurants – $15.8 million. The share of FDIs by these three economic sectors reached 87.5 % in Q1 of 2020.
Other Sectors were: communications – $12.8 million; mining – $10.4 million; construction – $7.7 million; transport – $6.4 million; manufacturing – $4.5 million; health and social work – $3.5 million.
Hereby, the World Bank’s recent report ‘Global Economic Prospects 2020’ is noteworthy. According to the document, the real gross domestic product (GDP) will decline in 2020 in Georgia and is estimated to be -4.8%, with projected recovery of growth at 4% in 2021.
The report also cites Georgia’s announced fiscal measures that are equivalent to 3% of GDP over the next few years, which include additional health spending, support for the tourism sector, accelerated and increased VAT refunds, a moratorium on tax payments for low-income earners, subsidised utility costs of the poor, and unemployment subsidies.
Overall, the Global Economic Prospects 2020 forecasts that growth in the South Caucasus will shrink to -3.1% this year as the subregion faces growth headwinds from the COVID-19 pandemic and, subsequently, low commodity prices.
“Activity is projected to pick up to 3% in 2021, as the impact of shocks related to the COVID-19 pandemic dissipates and tourism recovers alongside improving consumer and business confidence in Armenia and Georgia,” reads the report.
