When talking about the Greek crisis, the Minister of Economy and Sustainable Development of Georgia, Giorgi Kvirikashvili, pointed out that the developments in Greece will definitely affect the Georgian economy as well. The Minister underscored the issue of money transfers which have decreased significantly in the past few months.
FactChecktook interest in the influence of the Greek crisis upon the Georgian economy and analysed several of its aspects.
Georgia’s connection to the Greek economy is mainly in the field of money transfers. There are no official and detailed statistics about Georgian labour migrants working in Greece. According to unofficial data, however, about 200,000 Georgian citizens live and work in Greece. Greece occupies the second place after Russia by the amount of money transfers to Georgia. The amount of money transferred from Greece to Georgia had a trend of increase until 2015. A total of USD 205 million was transferred from Greece to Georgia in 2014 (see Chart 1). About USD 83 million was transferred in the first six months of 2015 which is USD 20 million (19%) less than in the same period of 2014. It should be pointed out, however, that Russia holds the first place in terms of the decrease of money transfers to Georgia. Money transfers from Russia to Georgia dropped by USD 14 million (41%) from January to May 2015.
Chart 1:
Money Transfers from Greece
Source: National Bank of Georgia
There has been no major Greek investment in Georgia in the past few years. Only a small part of export production goes from Georgia to Greece. Hence, the Greek crisis will have no direct or significant influence upon investments and exports. More important here is that Georgia’s largest investor and trade partner is the European Union (see Chart 2). About a half of the foreign direct investments in Georgia in 2014 came from European Union member states and a total of 27% of Georgian exports go to the European Union market according to the data from January to May 2015. Hence, if the European Union’s economy faces a risk owing to the Greek crisis, Georgia’s economy would be affected by this as well.
Chart 2:
Foreign Direct Investments from Greece to Georgia and Export of Georgian Production to Greece (USD million)
Source: National Statistics Office of Georgia
The Greek crisis coincided with Georgia’s economic problems. GEL has depreciated by a total of 29% in the past seven months. The economic growth rate dropped to 2.5% whilst the annual economic growth rate went down from 5% to 2.5%. Inflation has the trend of an increase, amounting to 4.5% at the end of June. Exports of Georgian production decreased by 24% from January to June 2015. Foreign direct investments dropped by 39% in the first quarter of 2015. This worsened economic situation has a negative influence upon the incomes of the state budget as well. The state budget’s revenue forecasts decreased by 3% (GEL 200 million) and the government was forced to amend the Law on State Budget. In the given situation, the sensitivity of the Georgian economy to external shocks increases even further.
According to the surveys, the greatest problem for the Georgian population is unemployment. According to the official data, unemployment went down by 2.2% in 2014 and the number of unemployed people equalled 246,000. However, about a million people are self-employed and are currently looking for a job. If Georgian labour migrants in Greece are forced to return to Georgia, it will be a significant social burden for the country. Should Georgians working in Greece lose their jobs, thousands of Georgian families will be left without income.
Conclusion
Money transfers from Greece to Georgia decreased by USD 20 million in the first six months of 2015.
Trade and investment relations between Georgia and Greece are not very well developed. However, the EU is an important trade and investment partner for Georgia. If the European Union’s economy faces a risk owing to the Greek crisis, Georgia’s economy would be affected by this as well.
The Greek crisis coincided with economic problems in Georgia. A very difficult reality for Georgia will be if Georgian citizens working in Greece are forced to return to Georgia as more than a million Georgians are already looking for a job in the country. Money sent from Greece to Georgia is, in fact, the only source of income for thousands of Georgian families.
FactCheck concludes that Giorgi Kvirikashvili’s statement, about the negative effects of the Greek crisis for the Georgian economy, is TRUE.
