In light of the COVID-19 pandemic-induced slowdown of activity as well as the spread of infection under restrictive policies adopted by governments worldwide as part of the pandemic response, the world economy has entered a recession. Georgia’s economy is not an exception. Pandemic-induced economic problems are transmitted to local economies through multiple channels and, specifically, in the case of Georgia, one of the most important channels is remittances from foreign countries. The currency flows are an important source of foreign currency in the country and are directly linked to the stability of the national currency’s exchange rate as well as people’s well-being. This article offers an overview of how the aforementioned flows have changed under the pandemic.

In the first five months of 2019, total remittances from abroad to Georgia amounted to USD 662 million.

Table 1[1] Remittances by Countries in January-May 2019 (First Five Months)

Source: National Bank of Georgia

As illustrated by the table, in the first five months of 2019, the Russian Federation accounted for 24.7% of the total remittances with USD 164 million. The second largest source of remittances is Italy with USD 93 million transferred in the first five months of 2019, amounting to 14% of the total remittances. The ‘Other’ category comprises countries whose share in the total remittances is less than 5%. In total, the volume of remittances from such countries was USD 155 million.

Table 2 shows the volume of remittances from the same country now under the pandemic – in the first five months of 2020. Of note is that the impact of the pandemic was not so important at the beginning of the year as compared to the period which followed. However, different countries experienced peak damage in different periods. Therefore, an analysis of the entire 2020 period will possibly give a better picture in order to see the impact of the pandemic rather than a selection of a certain timeframe which might not encompass the peak periods of all countries.

Table 2: Remittances by Countries in January-May 2020 (First Five Months)

Source: National Bank of Georgia

Table 2 shows that the volume of remittances in the first five months of 2020 was USD 600 million which is 9.5% less as compared to the same figure of the previous year. Italy become the largest source of remittances with USD 113 million; that is, 18.9% of the total remittances transferred from Italy. The Russian Federation moved to the second position with USD 101 million and a 16.8% share in the total remittances. Table 3 provides a comprehensive dynamic of the changes in remittances by countries.

Table 3: Changes in Volume and Structure of Remittances as a Result of the Pandemic

Source: National Bank of Georgia, Author’s Calculations

As the remittance dynamic shows, under pandemic in the first five months of 2020 remittances from the Russian Federation had the sharpest drop as compared to the same period of the previous year. Remittances from Russia decreased from USD 164 million to USD 101 million which is USD 63 million less and constitutes a 38.3% drop. In addition, Russia’s share in the total remittances decreased by 7.9 percentage points from 24.7% to 16.8%. As a result, the Russian Federation is no longer the largest source of remittances in 2020 as compared to 2019. In terms of a sharp decrease in remittances, Israel comes second in the group of the largest remittance-generating countries as remittances from Israel decreased by 11.9% from USD 65 million to USD 58 million. Remittances from Turkey decreased by 7.7%.

In the first give months of 2020, remittances from Italy increased by USD 20 million – from USD 93 million to USD 113 million which constitutes a 22.1% growth. Italy’s share in the total remittances increased by 4.9 percentage points from 14% to 18.9% and according to the data of the first five months of 2020, Italy is the largest source of remittances. This is somewhat unexpected given the fact that Italy is one of the worst-hit countries under the pandemic.