Loading

Resume: As compared to the first quarter of 2019, foreign direct investments dropped by 42%. The pandemic-induced crisis is in some way behind such a decline, although there also has been a clear-cut trend of a sharp drop in foreign direct investments in the pre-pandemic period and this remains as a serious problem.

According to the official data, USD 165 million in foreign direct investment (FDI) was made in Georgia in the first quarter of 2020. Of this amount, there was USD 28.1 million in FDI from the US which constitutes a 34% growth as compared to the same period of the previous year and amounts to 17% of the total investments in Georgia. Of note is that taking quarterly data separately is less relevant for a general analysis of the dynamic since specific indicators in a certain period of time might deviate from the general dynamic because of one-off factors. On the other hand, however, the global epidemiological situation needs to be taken into account and in this regard the quarterly dynamic does warrant our interest. In the nearest past, the FDI dynamic from the US to Georgia has been growing both quarterly and annually. American investments peaked in 2014 with USD 184 million amounting to 10% of the total annual FDI in Georgia.

Of note is that in the first quarter of 2020, the largest investor countries to Georgia are as follows: UK (USD 73 million), USA (USD 28.1 million), Panama (USD 19.6 million), Denmark (USD 11.5 million), Netherlands (USD 11.15 million) and Turkey (USD 11.13 million).

Analysis

At a meeting with the US Ambassador to Georgia, the Minister of Economy and Sustainable Development, Natia Turnava, stated: “In spite of the pandemic, foreign direct investments from the US in the first quarter of 2020 increased by 34% and with a 17% share, the US has become the second largest investor country in Georgia.”

Foreign direct investment (FDI) implies a resident of one country owning a share in a foreign-based enterprise and carrying out different types of economic operations related to that enterprise. An investor is considered to be a direct one if he has at least a 10% ownership stake in a foreign-based enterprise’s shares or the equivalent of such participation.

Currently, 2020 first quarter figures are available. As compared to the first quarter of 2019, foreign direct investments dropped by 42%. The pandemic-induced crisis is in some way behind such a decline, although there also has been a clear-cut trend of a sharp drop in foreign direct investments in pre-pandemic period and this remains as a serious problem.

Graph 1: FDI Quarterly Dynamic (USD Million)

Source: National Statistics Office of Georgia

In the first quarter of 2020, USD 165 million in foreign direct investment (FDI) was made in Georgia. Of that amount, there was USD 28.1 million in FDI from the US which constitutes a 34% growth as compared to the same period of the previous year and amounts to 17% of total investments in Georgia. Of note is that taking quarterly data separately is less relevant for a general analysis of the dynamic since specific indicators in a certain period of time might deviate from the general dynamic because of one-off factors. On the other hand, however, the global epidemiological situation needs to be taken into account and in this regard the quarterly dynamic does warrant our interest. As shown in Graph 2, in the nearest past the FDI dynamic from the US to Georgia has been growing both quarterly and annually. American investments peaked in 2014 with USD 184 million, amounting to 10% of the total annual FDI in Georgia.

Graph 2: FDI Dynamic from the US, Annual and Quarterly Figures (USD Million)

Source: National Statistics Office of Georgia

Of note is that in the first quarter of 2020, the UK was the largest investor in Georgia. Table 1 shows the countries which were Georgia’s largest investors in the first quarter of 2020 as well as the change of investment volumes from different countries as compared to the same period of 2019.

Table 1: Largest Investor Countries to Georgia in the First Quarter of 2020 (USD Million)

UK

USA

Panama

Denmark

Netherlands

Turkey

2019 IQ

61,521.1

20,952.3

45,402.3

10,969.6

-91,777.5

68,149.7

2020 IQ

73,062.7

28,109.6

19,606.6

11,595.1

11,156.9

11,133.5

% Change

18.8

34.2

-56.8

5.7

N/A

-83.7

Source: National Statistics Office of Georgia