1. Foreign direct investment (FDI) in Georgia reached $1.59bn (La4.22bn) in 2023, dropping by 24% following a year in which the country recorded more than $2bn in inflows.
2. FDI in Georgia reached $1.59bn in 2023, data gathered by the National Statistics Office of Georgia shows.
3. The number is 24% lower than the previous year when the country recorded slightly more than $2bn in total inflows.
4. Equity capital totalled $1.17bn last year, 68.3% higher than a year before ($696.8m). Earnings reinvestment hit $1.28bn in 2023, while debt – including trade in credits and loans – stood at negative $857.5m.
5. The major investor country in Georgia was the UK, with 24.6% of FDI volumes, followed by the Netherlands (22.6%) and Turkey (10.6%), respectively.
6. “The share of three major economic sectors in FDI reached 66.5% in 2023. The largest share of FDI was registered in the financial and insurance activities sector, totalling $630.1m (39.5%). Manufacturing was the second with $291.7m (18.3%), followed by the transport sector with $138.2m (8.7%),” reads the report released by the National Statistics Office of Georgia.
7. Georgia’s economy grew at a rate of more than 5% from 2005 through 2019, with the country’s fiscal and monetary policy focused on low deficit, low inflation and a floating exchange rate.
8. However, Russia’s full-scale invasion of Ukraine damaged growth prospects, with investors additionally raising issues with the Georgian judicial institutions’ ability to hear and adjudicate commercial cases on time and fairly.
9. Nevertheless, Georgia has made significant changes to its laws to attract more FDI. Despite the drop in FDI levels in 2023, the $1.59bn recorded last year was higher than during pre-Covid years – $1.35bn in 2018 and $1.35bn in 2019.
GEORGIA: FOREIGN INVESTORS LOSING INTEREST
1. The year-on-year dropoff in investment could be a reflection of concern in the West about the Georgian government’s future direction.
2. The government professes to favor membership in the European Union, and Georgia received a green light from Brussels in December to continue the accession process, but officials in Tbilisi have faced increasing criticism in the West for embracing illiberal practices. The government’s controversial actions in recent years include a failed attempt to adopt legislation to muzzle the non-governmental sector, stronger political ties with Russia, unsubstantiated accusations that a US government agency was funding subversive activity and tepid efforts to promote tolerance. The EU has mandated that the government implement liberal-minded reforms for Georgia to keep its membership bid on track.
3. Government officials have emphasized recently that the country is not dependent on any one country or region when it comes to FDI. “Despite a lot of speculation, the geography of our investments is quite diverse and it is not connected to one country,” said Economic Minister Levan Davitashvili on December 5. “Up to 50 percent of direct foreign investments… [comes] from EU countries, followed by the United States of America and the Persian Gulf countries.”
4. Davitashvili’s portrayal was way off. According to the 2023 Geostat figures, European states (taking into account Brexit) accounted for well over half of the FDI figure, while no Gulf State appears in the Top 10 list of FDI sources in 2023.
5. In addition, the share of new FDI in the overall 2023 figure amounted to just 20 percent of the overall total of $1.594 billion. The bulk of the money tallied as FDI in 2023 was reinvested funds. In 2022, the percentage of fresh FDI relative to the overall amount was 35 percent.
Source:
https://www.investmentmonitor.ai/news/fdi-georgia-drops-by-24-per-cent-in-2023/?cf-view
https://eurasianet.org/georgia-foreign-investors-losing-interest
