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Economy is booming with Russian money, emigration

Russians cross the border between Russia and Georgia, days after President Vladimir Putin announced a mobilization campaign on 21 September.

Daro Sulakauri | Getty Images News | Getty Images

As many economies recover from the effects of Russia’s invasion of Ukraine, select countries are benefiting from Russian immigrants and the wealth that comes with them.

Georgia, a small former Soviet republic on Russia’s southern border, is one of several Caucasus and surrounding countries, including Armenia and Turkey, that have seen their economies boom amid ongoing turmoil.

At least 112,000 Russians have immigrated to Georgia this year, according to reports, The first wave of around 43,000 came after Russia’s invasion of Ukraine on 24 February, while a second wave – the number of which is difficult to determine – followed Putin’s military mobilization campaign in September.

The country’s initial wave accounts for nearly a quarter (23.4%) of all emigrants out of Russia as of September. Online survey of 2,000 Russian expatriates Organized by the research group Ponars Eurasia. Most of the remaining Russian immigrants fled to Turkey (24.9%), Armenia (15.1%) and “other” countries (19%).

The floods have had a huge impact on Georgia’s economy – already up after a Covid-19 recession – and the Georgian lari, which has risen 15% against a strong US dollar so far this year.

We have had double digit growth, which no one expected.

Mikhail Kukawa

Head of Economic and Social Policy, Institute for the Development of Freedom of Information

The International Monetary Fund now expects Georgia’s economy 10% increase in 2022Revised its estimate again this month to more than triple 3% forecast since April.

“Increased immigration and financial flows triggered by the war,” were among the reasons cited for the uplift. The IMF also sees fellow host country Turkey growing 5% this year, while Armenia set to grow 11% On the back of “large inflows of external income, capital and labor into the country”.

Georgia has benefited this year from a dramatic jump in capital inflows, mainly from Russia. Russia calculates three-fifths (59.6%) Foreign capital inflows to Georgia in October alone – the total amount of which grew by 725% year-on-year.

Between February and October, Russian $1.412 billion transferred In Georgian accounts — more than four times the $314 million transferred over the same period in 2021 — according to the National Bank of Georgia.

Meanwhile, more open than Russian 45,000 bank accounts In Georgia by September, the number of Russian-held accounts in the country nearly doubled.

‘highly active’ migrants

Both Ukrainian refugees and Russian emigrants have fled to Georgia, a former Soviet republic with its own history of conflict with Russia, following Ukraine’s invasion of Ukraine on 24 February.

Daro Sulakauri | Getty Images News | Getty Images

“We have a double-digit growth, which no one expected,” said Mikhail Kukawa, head of economic and social policy at the Institute for Development of Freedom of Information (IDFI), a Georgian think tank. told CNBC via Zoom.

To be sure, a significant proportion of the increase comes after increases during the coronavirus pandemic. But Kukawa said it is also a sign of economic activity for the new arrivals. While the influx of thousands may appear minimal even for a country like Georgia with a modest population of 3.7 million – it is more than 10 times 10,881 Russians who arrived throughout 2021,

“They are highly active. 42,000 randomly selected Russian citizens would not have had this impact on the Georgian economy,” Kukawa said, referring to the first wave of immigrants, many of them wealthy and highly educated. The second wave, by comparison, was more likely to be motivated to quit by “fear”, he said, than by economic means.

‘Boom became bang’

One of the most visible effects of the new arrivals has been on Georgia’s housing market. Property prices in the capital Tbilisi, up 20% year-on-year Further transactions were up 30% in September, according to Georgian bank TBC. There was a 74% increase in rents over the year.

According to Georgia’s National Statistics Office, 12,093 new Russian companies were registered in Georgia from January to November this year, more than 13 times the total number established in 2021.

The Georgian lari is now trading at a three-year high.

The Kremlin could use their presence as a pretext for further intervention or aggression.

However, not everyone is excited about the new outlook for Georgia. As an ex-Soviet republic that fought a short war with Russia in 2008, Georgia’s relationship with Russia is complicated, and some Georgians fear the socio-political ramifications that the arrival could have.

Indeed, the Hudson Institute, a Washington, DC-based think tank, warned that “the Kremlin could use their presence as a pretext for further interference or aggression.”

IDFI’s Kukawa worries that this could also mark a “boom turn bang” for the Georgian economy: “The ‘boom turn bang’ happens when the Russian plutocratic government and this pariah country come after them,” he said of Russian immigrants. Referring to said. “This is the fundamental concern in Georgia.”

“Even if they are not a threat per se,” Kukawa continued, describing most migrants as “new generation” Russians, “the Kremlin could use that as an excuse to come and protect them. Exceeds any economic impact that might happen.”

bracing for recession

Forecasters appear to be taking that uncertainty into account. Both the Georgian government and the National Bank have said they expect growth to slow in 2023.

The IMF also sees growth falling further to around 5% next year.

“Growth and inflation are expected to slow in 2023 due to a reduction in external flows, deterioration in global economic and financial conditions,” the IMF said in its note earlier this month.

,[That] indicates that the Georgian government does not expect that they are going to stay,” Kukawa said of the Russian arrival.

Between March and April, less than half (43%) of Russian migrants said at the time that they planned to stay longer in their initial host country, according to a survey by Ponars Eurasia. More than a third (35%) were undecided, nearly one-fifth (18%) intended to move elsewhere, and only 3% planned to return to Russia.

“We are in a better position – both the government and the National Bank – if we don’t base our economic assumptions on the premise that these people will stay,” Kukawa said.

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