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Georgia Attracted Historical Amount of Foreign Direct Investment in 2017

In 2017 the inflow of foreign direct investment to Georgia hit a historic maximum. According to Geostat, the national statistics service of Georgia, in 2017 FDI inflows constituted $1.861 billion, up 16.2% from the previous year ($259.1 million).

Prior to publishing the 2017 indicators, Geostat reported that major FDI inflow was recorded in 2007, apparently more than $2 billion. However, the recent report shows that Geostat previously published wrong information.

“We have fulfilled the recommendations given by the November 2016 IMF mission. Those recommendations called for keeping records on FDI positions [balance] in Georgia in an integrated format [in accordance with international investment conditions, which call for recording balances jointly with flows]. As noted earlier, this process has improved historical data dynamics and harmonized balances and flows. Changes concerned the 2006-2017 indicators. Results will be reflected by statistics of payment balance, international investment positions and external debts, which are compiled by the National Bank of Georgia (NBG),” the Geostat statement reads.

It is ridiculous that before this correction Geostat and NBG published controversial indicators on the 2007 FDI inflows. As a result of recalculation, the 2007 indicator was corrected to $1.752 billion. From 2006-2017 the quarterly FDI inflows were as follows: (Table #1)

According to Geostat, in the fourth quarter of 2017 FDI inflows were $497.4 million, up 89.1% ($234.3 million) over the same period in 2016.

FDI inflows in the construction sector rose by 114% ($156.9 million) and constituted $294.6 million. In the financial sector, investments rose by 98% ($150.4 million) and made up $304.3 million. In the power sector, FDI inflows rose by 61% ($71.5 million) and amounted to $188.6 million.

Major grow in FDI inflows was recorded in real estate and the hotel and restaurant sector. The former sector increased by 68% (+64.6 million USD), while a 58% upturn was recorded in the latter sector ($33.1 million). In total, the investment in these sectors was $159.8 million and $90 million, respectively.

It should be noted that the investment volume grew in real sectors of the economy, including in agriculture, the mining industry, the processing industry, energy and the development sector. In the real sector, investment volume rose by 39.3% ($173.6 million) and constituted $615.5 million.

Major FDI inflow was registered in transport and communications – $527.1 million, which is 28.3% of total FDI volume. The financial sector ranks second, with $304.3 million (16.3%); and the construction sector is third, with $294.6 million (15.8%). As to the contributing countries, major investments were made from Azerbaijan ($482.1 million or 25.9%), Turkey ($279 million USD or 15%) and the United Kingdom ($250.4 million or 13.4%).

It is also worth noting that in 2017 a record-high indicator was registered in terms of reinvestments. For example, in 2015 the ratio of reinvestments in FDI made up 9.5%, in 2016 the number had increased to 19.4% and in 2017 had reached 38.2%.

Despite 2016’s record-breaking success in terms of FDI inflows, Georgia’s economy has essentially not increased. Last year GDP growth constituted only 4.8%. This fact confirms that Georgia follows incorrect investment policies, as the country should promote foreign investments oriented around supporting domestic production and export development. Only this type of investment brings true benefits to the country.