Georgia

country report

Student : Khatuna Buchashvili

Subject:Finance

General Information

Georgia
AreaTotal69,420km2(120th)
Ethnicgroups 83.8%Georgian
6.5%Azerbaijani
5.7%Armenian 1.5%Russian
2.5% others
Main economic activities
The country imports nearly all its
needed supplies of natural gas
and oil products. It has sizeable
hydropower capacity that now
provides most of its energy
needs.

Estonia
Area :Total45,339 km2
Ethnicgroups(2015)69.1%
Estonians 5.2%Russians
1.7%Ukrainians,0.9%Belarusi
ans;0.6%Finns,0.2%Jews,
2.3%Others
Main industries
Import goods :machinery and
electrical equipment, mineral
fuels, chemical products,
foodstuffs, plastics, textiles

Population
5000000
4500000
4000000
3500000

Estonia
Georgia

3000000
2500000
2000000
1500000
1000000
500000
0

2008

2009

2010

2011

2012

2013

2014

The all time high of Population for Georgia was 4.5m in 2012, the
historical lowest value for this indicator was 4.3m in 2004 according to
data released by the Worldbank.The all time high of Population for Estonia
was 1.6m in 1990, the historical lowest value for this indicator was 1.2m in
1960

Unemployment rate
18
16
14
12

Estonia
Georgia

10
8
6
4
2
0

2008

2009

2010

2011

2012

2013

2014

As you can see the highest rate for Georgia was 16.9 during
this period and for Estonia in 2010 .

Nominal
GDP/capita(annual /USD)
Estonia

Georgia

25000
20000
15000
10000
5000
0
2008

2009

2010

2011

2012

2013

2014

Economic Growth
Real GDP per capita
%
Estonia
15
10
5
0
2008
-5
-10
-15
-20

2009

2010

2011

Georgia

2012

2013

2014

The all time high of GDP real total for Georgia was 15.2 in 1970, the historical
lowest value for this indicator was -45.3 in 1992.
According the World Bank, the all time high of GDP real total for Estonia was
13 in 1997, the historical lowest value for this indicator was -14.6 in 2009.

Inflation
Estonia

Georgia

12
10
8
6
4
2
0
2008
-2

2009

2010

2011

2012

2013

The all time high of Consumer price index - CPI all items for Estonia was
10.4 in 2008, the historical lowest value for this indicator was -0.106 in
2014 according to data released by the OECD.
While the all time high of Consumer price index - CPI all items for
Georgia was 162.7 in 1995, the historical lowest value for this indicator
was -0.935 in 2012 according to data released by the World Bank.

2014

Market capitalisation/annual % GDP

Estonia

Georgia

16
14
12
10
8
6
4
2
0
2008

2009

2010

2011

2012

The all time high of Market capitalisation for Georgia was 13.7 in 2007, the
historical lowest value for this indicator was 0.792 in 2000 according to data
released by the World Bank.
The all time high of Market capitalisation for Estonia was 51.4 in 2004, the
historical lowest value for this indicator was 7.07 in 2011

 Level of independence

Monetary
policy Georgia vs Estonia
Georgia
As we know The National Bank should be independent in its

decisions to set the target and utilize its instruments to conduct

monetary policy.The Organic Law and the Constitution The NBG can
independently set the target and conduct the policy to attain it.
Georgias economic freedom score is 73.0, making its economy the
22nd freest in the 2015 Index.
Estonia
The Bank is fully independent, and not subordinated to the
government or any other executive state institution, and is
accountable only to parliament.
The main task of the Bank is formulating and realising state
monetary policy. In addition, it oversees the credit institutions and
helps to safeguard financial stability, issues coins and banknotes,
keeps a check on payment systems and administers the states
foreign currency reserves.

Lending interest rate

Estonia
20
18
16
14
12
10
8
6
4
2
0
2008

2009

2010

2011

Georgia

2012

2013

The average value for Georgia during that period was 23.62
percent with aminumum of 11.91 percent in 2014and
amaximum of 58.44 percent in 1996.

2014

1USD=home currency
Estonia

Georgia

14
12
10
8
6
4
2
0
2008

2009

2010

2011

2012

2013

2014

According to the World Bank in Aug-2015 Local currency unit per 1 USD
with the unit "average" for Georgia reached 2.34. The preceding month,
i.e. Jul-2015, it was 2.26 and a year ago, i.e. in Aug-2014 it was 1.73.

Main revenues
Georgia
Taxesavailable:6flattaxes

PersonalIncomeTax20%
TaxesVAT18%
CorporateIncomeTax15%
Dividend&InterestIncomeTax5%
Importtax0;5%,12%
Landtax(property)upto1%
NopayrolltaxorsocialinsurancetaxNocapital

gainstaxNowealthtax,inheritancetaxorstamp
duty
Foreign-sourceincomeofindividualsfullyexempted,
AccordingtoTaxMisery&ReformIndexGeorgia
hasthefourthlowesttaxburdengloballyVerystrong
politicalcommitmenttolowandsimpletaxationand
improvementofservices.Significantlystreamlinedtax
andcustomsadministrationgearedtowardsprovision
ofmaximumcomforttobusinessesandinvestor.
hasdoubletaxationavoidancetreatieswith47
countries

Estonia
Nationaltaxes+localtaxes
personalincometax20%
VAT20%(reducedrateis9%and0%in
somecases.)
therateofsocialtaxis33%(20%for
socialsecurityand13%forhealth
insurance).
landtax(between0.1%and2.5%ofthe
assessedvalueoftheland
gamblingtax(taxischargedalsoon
gamblingtablesandmachinesusedfor
gamesofchancelocatedonlicensed
premises.)
dutyandexcisetaxesandheavygoods
vehicletax.
Localgovernmentshavetheauthorityto
imposelocaltaxes
doesnotimposeanygift,inheritanceor
estatetaxes.Varioustransactionsmaybe
subjecttopaymentofstatefees(stamp
duties).

Revenue
Figure 3:structure of revenue Georgia
2008
2014

90.00%81.18% 83.37% 82.98%

80.00%

89.25% 88.24% 89.58% 89.19%

70.00%
60.00%
50.00%
40.00%
30.00%

Taxes
Grants
Other revenue

20.00% 10.54%
9.25% 8.05%
8.97% 7.50% 8.18% 7.21% 7.36%
8.27% 7.38%
3.25% 3.58% 3.22% 3.44%
10.00%
0.00%

Source:National Bank of Georgia

Expenditures
Figure 4 structure of expenditure Georgia
2008
2014

40.00%
35.00%
30.00%
25.00%
20.00%

Compensation
of employees
Use of goods
and services
Interest
Subsidies

15.00%
10.00%
5.00%
0.00%
Source:National Bank of Georgia

Grants
Social benefits
Other expense

9%

2008

5%

3%

Defense
Economic affairs

25%

Environmental protection
Housing and community
amenities

5%

Health

9%

Recreation, culture and

religion

1%
14%

General public services

Education

26%

Social protection

2009
General public services
Environmental protection
Recreation, culture and religion

Defense
Housing and community amenities
Education

10%
4%

8%
30%

6%
6%
15%
2% 18%

Economic affairs
Health
Social protection

2010

2011

Generalpublicservices;15%
Socialprotection;23%

Generalpublicservices;14%
Socialprotection;24%

Defense;11%
Education;10%
Economicaffairs;18%
Recreation,cultureandreligion;5%
Health;7% Environmentalprotection;2%
Housingandcommunityamenities;9%

Defense;11%

Education;10%
Economicaffairs;17%
Recreation,cultureandreligion;6%
Environmentalprotection;2%
Health;6%
Housingandcommunityamenities;11%

2011

2012

2013

Generalpublicservices;13%
Socialprotection;24%
Defense;10%

Education;11%
Economicaffairs;22%
Recreation,cultureandreligion;6%
Health;6% Housingandcommunityamenities;7%
Environmentalprotection;1%

Generalpublicservices;13%
Socialprotection;29%
Defense;9%

Economicaffairs;18%
Education;12% Environmentalprotection;2%
Recreation,cultureandreligion;5%
Housingandcommunityamenities;5%
Health;8%

2014

Generalpublicservices;13%
Socialprotection;30%

Defense;8%

Economicaffairs;17%
Education;12% Environmentalprotection;2%
Housingandcommunityamenities;4%
Recreation,cultureandreligion;5%
Health;9%

As you can see

from the data ,the
most revenue
expenditures were
on Social
protection
,economic affairs
and general public
services

BALANCE OF PAYMENTS
Trading balance
Transfer payment(Remittances)
Current account
The current account on the balance of payments measures

the inflow and outflow of

goods, services and investment incomes. A deficit on the current account means that the value of
imports is greater than the value of exports.A surplus on the current account means that the value
of imports is less than the value of exports.
FDI investment is a part of the national accounts of a country.FDI is defined as the net inflows of
investment (inflow minus outflow) to acquire a lasting management interest in an enterprise
operating in an economy other than that of the investor.FDI is the sum ofequity capital, other longterm capital, and short-term capital as shown thebalance of payments. FDI usually involves
participation in management,joint-venture,transfer of technologyand expertise.]FDI is one
example ofinternational factor movements
Portfolio investment includetransactionsinequitysecurities, such ascommon stock,
anddebtsecurities, such asbanknotes,bonds, anddebentures.Portfolio investments arepassive
investments, as they do not entail activemanagementor control of the issuing company. Rather,
the purpose of the investment is solely financial gain. This is in contrast toforeign direct
investment(FDI), which allows an investor to exercise a certain degree of managerial control over a
company.Portfolio investment covers a range of securities, such as stocks and bonds, as well as
other types of investment vehicles.

Trade Balance(difference between import and export)

Estonia
10
5
0
2008
-5
-10
-15
-20
-25
-30
-35

2009

2010

2011

Georgia

2012

2013

The average value for Georgia during that period was -17.99
percent with aminumum of -51.36 percent in 1994and amaximum
of 0.7 percent in 1 The average value for Estonia during that period
was -3.6 percent with aminumum of -10.15 percent in 2006and a
maximum of 6.36 percent in 2010.

2014

Current transfers-Remittances are the money sent home by people who work in a foreign country
%GDP

Current transfers

Estonia

Georgia

14
12
10
8
6
4
2
0
2008

2009

2010

The highest for Georgia was in 2014

For Estonia 2013

2011

2012

2013

2014

Current account(balance of payment

% of GDP)
Estonia

Georgia

5
0
2008
-5

2009

2010

2011

2012

2013

-10
-15
-20
-25
While the all time high of Current account (BoP), net for Georgia was
-5.74 in 2013, the historical lowest value for this indicator was -22 in
2008 according to data released by the World Bank.
The all time high of Current account (BoP), net for Estonia was 2.5 in
2009, the historical lowest value for this indicator was -15 in 2006
according to data released by the Eurostat.

2014

FDI investment Balance of payment

(% of GDP)
Estonia
0
2008
-2

2009

2010

2011

Georgia
2012

2013

2014

-4
-6
-8
-10
-12
the all time high of Foreign direct investment (FDI) (BoP), net for
Georgia was -3.88 in 2012, the historical lowest value for this indicator
was -16.5 in 2007 according to data released by the World Bank,
transformation made by Bluenomics.

Portfolio investment Balance of payment

(% of GDP)
Estonia

Georgia

15
10
5
0
2008
-5

2009

2010

2011

2012

2013

2014

-10
The all time high of Portfolio investment (BoP), net for Georgia was
0.227 in 2013, the historical lowest value for this indicator was -5.35 in
2012 according to data released by the World Bank
The all time high of Portfolio investment (BoP), net for Estonia was 16.1
in 2005, the historical lowest value for this indicator was -6.93 in 2011
according to data released by the World Bank, transformation made by
Bluenomics.

Source:National Bank of Georgia

If we compare the growth rates of the external debt and exports it

becomes clear that the growth of exports was higher than that of the
external debt, except in 2008 and 2009. This means that the country
managed to attract currency resources in order to fund the external
debt. Today, the lower economic growth and the trend of a reduction in
exports negatively influence the countrys creditworthiness which has
worsened Georgias positions in international credit ratings.

International Ranking

Overview of the economy of Georgia

In the first quarter of 2014 most economic indicators are looking
healthy for the country, including the export where first three months
of the year has displayed a growing tendency.
The growth rate of Georgias external debt did indeed exceed the
economys growth rate from 2008 to 2012 whilst it was lower than the
economys growth rate in 2013 and 2014 despite the fact that the economic
growth rate also decreased In addition, despite the fact that the external
debt in absolute terms went down in 2013, it increased with regard to the
GDP due to the depreciation of GEL.
ADVISE:The country should try to minimize its dependence on that
market and continue to establish itself on the other markets as well as
seek new ones.
Unemployment issue -the largest challenge for the country. The
government should encourage the development of businesses in
Georgia,create well-defined long-term economic strategy for ensuring
stable business environment. It is important for the local businesses to
develop.The current administration should not only create a favorable
business environment, but also communicate its presence and attract
FDI from the foreign firms.

Overview of Estonian Economy

Estonia's economy fell into recession in mid-2008, as a result of an

investment and consumption slump following the bursting of the real estate
market bubble and a decrease in export demand has recovered strongly in
the last five years. Growth was expected to top 2% in 2014, before the
events in Ukraine.
The risks around Estonian inflation are on the upside for the coming years.

The global oil price has fallen sharply since the summer and this has slowed
consumer price inflation even despite the dollar appreciating against the
euroThe second threat noted in June that has now declined significantly is the
rapid rise in real estate prices.
The Estonian economy in 2014 was oriented more towards the domestic

market, which offset the weakness that has dragged on in foreign markets
Finding new markets would help to counterbalance the uncertainty about the
recovery in demand that has been around for some time now and has
restrained investment activity among companies

Sources :
National Bank of Georgia

https://www.nbg.gov.ge
Bluenomics
http://www.worldbank.org/
http://www.theglobaleconomy.com
Economic Policy research centre
http://www.indexmundi.com/
Eurostat
www.mof.ge (Ministry of finance Georgia)

Thank you for your kind attention !