BAKU, Azerbaijan, Jan. 25
By Tamilla Mammadova – Trend:
With a nominal GDP of less than $18 billion in 2019, and moderate GDP per capita Georgia's economy is susceptible to shocks, the Moody's Investors Service told Trend.
"At this point in its development, there is only limited scope for domestic consumption to support demand, establishing a dependence on external markets," the source said.
As the Moody noted, Georgia's economy has become more diversified and focused on higher value added sectors over the past decade, with growth in sectors such as automotive, chemical and pharmaceutical products increasing their share while dependence on exports of metals and ores, which accounted for almost half of all goods exports in 2010, declining.
"However, reflecting the country's small population, highly arable land and favorable climate, primary and near-primary industries such as the production of wine and other beverages continue to be a source of comparative advantage and account for a significant proportion of goods exports," the Moody said.
The importance of primary industries is further demonstrated by more than 40 percent of Georgia's work force being engaged in agriculture in 2019, the company added.
As the source noted, since the beginning of this century, the Georgian government has striven to strengthen economic ties with western blocs such as the EU, both as a means of diversification and converging its business and regulatory environment with those of more developed economies.
"In 2014, it entered into a Deep and Comprehensive Free Trade Area (DCFTA) with the EU, which was implemented in 2016 and replaced the previous Generalized System of Preferences agreement, which had provided tariff-free access to the EU market for thousands of goods since 2005. The DCFTA expanded tariff-free access to all food and beverage products, including wine, although certain specific products remain subjected to quotas and special fees," the Moody added.
However, the DCFTA is unlikely to substantially impact Georgia's goods exports in the medium term because of the considerable investment required by company's to meet the EU's strict regulatory standards, said the agency.
"Instead, Georgia's neighbors, with which it also has a multilateral and several bilateral trade agreements, remain the primary destinations for goods exports, accounting for more than half of the total in 2019," the company said.
"The CIS remains an especially attractive market to Georgian exporters because its quality control requirements are already met by Georgian exports and, in the case of Azerbaijan and Russia, proximity," the source said.
According to the Moody, Georgia's trade with the CIS also been boosted by the normalization of relations with Russia over the past decade, which in 2019 was the destination for more than 13 percent of goods exports from less than 2 percent in 2012.
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