Georgia records significant decrease in FDIs – PMC

Georgia Materials 2 November 2021 19:24 (UTC +04:00)

BAKU, Azerbaijan, Nov. 2

By Maryana Akhmedova – Trend:

The total volume of foreign direct investments (FDI) entering Georgia from January through June 2021 amounted to $366.4 million, which represents the lowest volume of FDI for the first half of a year for the last 11 years, Trend reports, referring to the research of Policy and Management Consulting Group.

According to PMC research, the Georgian economy has started to recover from the crisis caused by the COVID-19 pandemic, although it continues to be an important reason behind the decline of Georgia’s FDI inflows in 2021.

Georgia received $572 million of FDI in 2020, which is a decrease of 57 percent, compared to 2019 and the lowest volume since 2005, the research said.

“This decline of 57 percent is significantly higher than the average FDI decline in the world (34 percent) or in developing countries (8 percent),” PMC noted.

However, even before the severe blow from the COVID-19 pandemic, there was already a tendency for the FDI to decrease in Georgia, PMC said.

According to the research, if in 2014 the FDI volume in Georgia was $1.8 billion, although in 2019 this figure was only $1.3 billion or 27 percent less.

“From 2017 onwards, most investments come from non-trading sectors, such as the financial sector, transport and communications, energy and real estate. These sectors received a total of 62 percent of investments in the second quarter of 2021,” PMC said.

FDI is even smaller in the trade sectors, particularly in agriculture and manufacturing (including the agricultural products industry).

Taking into account the stock FDI accumulated since 2017, only 0.3 percent of investments were made in agriculture and 8.9 percent in industry.

PMC noted that the lack of FDI in the agricultural sector may be related to stricter land ownership regulations by foreigners, despite the fact that the investments in agriculture were low even before this restriction, but such regulations may give such signals to foreign investors in a way that could produce long-term negative consequences on the investments in Georgia’s agriculture.

“FDI figures in Georgia during the last decade show a reduction in the share of equity investments and the high share of reinvestments in the FDI structure, which means that the inflow of new investments to the country has decelerated markedly,” the research said.

Despite the introduction of some successful reforms and some notable achievements being recorded, there remain essential problems in Georgia that must be addressed by further reforms in order to attract and retain FDIs and to also effectively use those investments to achieve greater economic growth, PMC added.


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