Economy under pressure

The August war and the world financial crisis have created dramas for the Georgian economy. The construction business, tourism, railway transportation, small businesses and other sectors are under serious pressure. Until recently only the banking sector had managed to survive relatively unscathed.

The situation in the construction business is dire. The direct investment inflow has slowed down considerably and several investment projects have been delayed, among them the Kazakh projects to build an oil refinery in Batumi and a grain terminal in Poti. In 2008 investments have been USD 4 hundred million less than last year.

Georgian exports have also decreased dramatically. From GEL 250 for one tonne of scrap metal the price has come down to GEL 40. Rustavi Metallurgy and the Zestaponi ferro alloy factory which were producing metal for export have almost ceased functioning. The negative trade balance between export and import has increased, as imports now account for 90% of the total trade turnover.

The authorities think that the USD 4.5 billion donated to rehabilitate Georgia’s economy might rescue the country. However this inflow has already been diverted to supporting the banking sector and no visible results have been seen.