As FDI slows down, the government remains optimistic
IMF on investment funds
Author: By Nino Edilashvili
Foreign Direct Investment accounted for $226 million in the first quarter of 2013, according to the preliminary figures of the state statistics office, GeoStat. In the same period last year, this figure stood at $269 million and in 2011 – at approximately $210 million.
In the first quarter of this year, the five leading investing countries were Japan (20 %), Azerbaijan (17), the Netherlands (15%), the UK (8%), and China (6%).
Most highly attracted sector for investors was the finance sector with $65 million, making 29% of the total investment in the first quarter of 2013. Energy with $42 million and mining with $13 million came in second and third respectively. Transports and communications and manufacturing also made the top five.
In 2012, FDI dropped by 22% and totaled $865 million, according to GeoStat’s preliminary figures issued in early March. In 2010 and in 2011 the foreign capital made $814 million and $1.1 billion respectively.
Annually, Georgia needs around $2 billion in FDI to cover its deficits. Since the Rose Revolution in 2003, the highest volume of foreign capital which the country has seen was in 2007, when foreign capital stood at $2.15 billion, approximately 20% of GDP.
According to the economic growth forecast issued by European Bank for Reconstruction and Development (EBRD) in early May, Georgia’s economic growth slowed down at the end of 2012, “likely due to lower investment and uncertainty related to the post-election political transition.”
EBRD’s experts cut their 2013 growth forecast for Georgia by two percentage points announcing that the country’s economy will grow by 3% this year instead of the 5% it forecasted earlier in January. This forecast is also lower than the Georgian government’s official forecast of 6% growth for 2013. Last year, Georgia’s economy grew by 6.2%.
For comparison, EBRD predicts that Azerbaijan’s GDP will increase 3.5%, up from 2.2% in the previous year and Armenia will also face a decline as its economy will grow by 5.0% versus 7.2% growth in 2012.