From Russia with cash: Georgia booms as Russians flee Putin’s war

  • At least 112,000 Russians immigrated to neighboring Georgia
  • Georgia is determined to be one of the fastest growing economies in the world
  • Some local people are given housing prices, education
  • The economy may face difficulties if the people who come leave

TBILISI, Nov 5 (Reuters) – As war ravages Europe, a small nation under Russian rule has enjoyed an unexpected economic boom.

Georgia is on track to become one of the fastest growing economies this year following an influx of more than 100,000 Russians since Moscow’s invasion of Ukraine and Vladimir Putin’s campaign to mobilize people for war.

As much of the world approaches recession, this country of 3.7 million people on the edge of the Black Sea is expected to record a strong growth of 10% in economic output in 2022 amid a boom led by consumption, according to world institutions.

That would see the modest $19 billion economy, best known in the region for its mountains, forests and wine valleys, outpace emerging markets such as Vietnam and oil exporters such as Kuwait buoyed by high crude prices.

“On the economic side, Georgia is doing very well,” Vakhtang Butskhrikidze, CEO of the country’s largest bank TBC, told Reuters in an interview at its headquarters in Tbilisi.

“There is a kind of boom,” he added. “All businesses are doing very well from micros to corporates. I can’t think of any business that is struggling this year.”

At least 112,000 Russians have moved to Georgia this year, border crossing statistics show. The first large wave of 43,000 arrived after Russia invaded Ukraine on February 24 and Putin moved to oppose the war at home, according to the Georgian government, with the second wave coming after Putin declared a nationwide lockdown at the end of September .

Georgia’s economic boom – whether short-term or not – has baffled many experts who have seen the negative effects of war on the former Soviet republic, whose economic fortunes are closely tied to their big neighbor’s exports and tourists.

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The European Bank for Reconstruction and Development (EBRD), for example, predicted in March that the conflict in Ukraine would have a major impact on the Georgian economy. Likewise, the World Bank forecast in April that the country’s growth in 2022 will decrease to 2.5% from the initial 5.5%.

If the war in Ukraine will have a negative impact on the economy of Georgia, so far we do not see the occurrence of these risks, said Dimitar Bogov, the EBRD’s economic leader in Eastern Europe and. in the Caucasus.

On the contrary, we see the economy of Georgia growing well this year, double digits.

Yet the dramatic growth isn’t benefiting everyone, with the arrival of tens of thousands of Russians, many of whom are high-net-worth tech professionals, driving up prices and squeezing Georgians out of areas of the economy such as the housing rental market and education.

Business leaders also worry that the country could face a difficult landing if the war ends and the Russians return home.

TO GEORGIA FOR $1 BILLION

Georgia itself fought a brief war with Russia in 2008 over South Ossetia and Abkhazia, territories controlled by Russian-backed separatists.

Now, however, Georgia’s economy is reaping the benefits of its proximity to superpowers – the two share a land border – and an immigration policy that allows Russians and foreigners to live, work and set up businesses in the country without a visa.

Moreover, those who fled the Russian war were accompanied by a large sum of money.

Between April and September, Russians transferred more than 1 billion dollars to Georgia through banks or money transfer services, five times more than in the same months of 2021, according to the central bank of Georgia.

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That entry helped push Georgia’s Larry to its strongest point in three years.

Almost half of Russian arrivals are from the technology sector, according to TBC CEO Butskhrikidze and local media, reviewing and estimating business figures in Russia that point to an exodus of tens of thousands of IT workers driven largely by the attacks. of Ukraine.

“These are elite people, rich people… they come to Georgia with business ideas and to increase consumption quickly,” said Davit Keshelava, a senior researcher at the International School of Economics at Tbilisi State University (ISET).

“We expected the war to have many negative effects,” he added. “But it was very different. It seemed good.”

NO ROOMS IN TBILISI

Nowhere is the impact of the arrivals more apparent than in the capital’s rental housing market, where increased demand is putting pressure on it.

Rents in Tbilisi have risen by 75% this year, according to TBC bank analysis, and some low-income earners and students find themselves at the center of what activists say is a growing housing crisis.

Georgia’s Nana Shonia, 19, agreed to a two-year contract to live in the city center for $150 a month, just weeks before the Russian invasion. In July, the landlord evicted him, forcing him to move to a rougher place on the outskirts of the city.

“It used to take me 10 minutes to get to work. Now at least 40, I have to take the bus and the metro and I’m always stuck in traffic,” he said, explaining the change in market dynamics in surgery. for the new arrivals.

Helen Jose, a 21-year-old medical student from India, had been crashing with a friend for a month after her rent doubled during summer break.

“Before it was easy to find a place to live. But many of my friends have been told to leave, because there are Russians who are willing to pay more than us,” he said.

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University figures also revealed significant numbers of students delaying their studies in Tbilisi because they cannot afford accommodation in the city, said Keshelava at ISET.

‘Trouble Can Strike’

TBC’s Butskhrikidze said he saw that these new arrivals could fill gaps in Georgia’s economy.

“They are very young, technologically educated and knowledgeable – for us and other companies in Georgia this is a useful opportunity,” he said.

“An important challenge for us is technology. And unfortunately in this area we compete with high-tech companies in the United States and Europe,” he added. “To win quickly, these immigrants are very useful.”

However, economists and businesses remain concerned about the long-term negative effects of the war, and what could happen if the Russians return home.

“We don’t build our future plans for young people,” said Shio Khetsuriani, CEO of Archi, one of Georgia’s largest real-estate companies.

Although rent prices are rising, Khetsuriani says development companies do not want to invest too much in the housing market, especially as the prices of materials and equipment are rising. While landlords may be making money from increased rents, the profit margins for selling apartments have not changed, he said.

Economists also warn that the boom may not last, and urge the Georgian government to use healthy tax revenues to pay off debts and build foreign currency reserves while they can.

“We must note that all these factors driving growth this year are temporary, and do not guarantee sustainable growth in the following years, so we must be careful,” said Bogov at the EBRD.

“Uncertainty remains and this crisis could hit Georgia with a delay.”

Narration by Jake Cordell; additional reporting by David Chkhikvishvili; edited by Guy Faulconbridge and Pravin Char

Our standards: The Thomson Reuters Trust Principles.

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