From Russia with cash: Georgia booms as Russians flee Putin’s war

  • At least 112,000 Russians moved to neighboring Georgia
  • Georgia has one of the fastest growing economies
  • Some locals are asking for housing, education
  • The economy could face a hard landing if the newcomers leave

TBILISI, Nov 5 (Reuters) – As war chokes Europe, a small nation wedged under Russia is enjoying an unexpected economic boom.

Georgia is on course to become one of the world’s fastest-growing economies this year after a dramatic influx of more than 100,000 Russians since Moscow’s invasion of Ukraine and Vladimir Putin’s mobilization drive Putin to collect war recruits.

As much of the globe slides into recession, this country of 3.7 million people bordering the Black Sea is expected to record a robust 10% growth in economic output by 2022 amid a boom driven by consumption, according to international institutions.

That would see the modest $19 billion economy, well-known in the region for its mountains, forests and wine valleys, outpace supercharged emerging markets like Vietnam and oil exporters like Kuwait backed by the high crude oil prices.

“On the economic side, Georgia is doing very well,” Vakhtang Butskhrikidze, CEO of the country’s largest bank, TBC, told Reuters in an interview at its Tbilisi headquarters.

“There’s a kind of boom,” he added. “All industries are doing very well from micros to enterprises. I can’t think of any industry that this year has problems.”

At least 112,000 Russians have emigrated to Georgia this year, border statistics show. A first big wave of 43,000 came after Russia invaded Ukraine on February 24 and Putin moved to announce opposition to the war at home, according to the Georgian government, with a second wave after Putin announced the national mobilization at the end of September.

Georgia’s economic boom – whether short-lived or not – has confounded many experts who have seen dire consequences from the war for the former Soviet republic, whose economic fortunes are closely tied to its larger neighbor through exports and tourists .

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The European Bank for Reconstruction and Development (EBRD), for example, predicted in March that the conflict in Ukraine would deal a major blow to the Georgian economy. Similarly, the World Bank predicted in April that the country’s growth for 2022 will drop to 2.5% from an initial 5.5%.

“Despite all the expectations we had … that this war in Ukraine will have significant negative implications on the Georgian economy, so far we do not see the materialization of these risks,” said Dimitar Bogov, the economist head of the EBRD for Eastern Europe and the Caucasus.

“On the contrary, we see the Georgian economy growing quite well this year, double digits.”

Still, the stellar growth isn’t benefiting everyone, with the arrival of tens of thousands of Russians, many tech professionals with a lot of money, driving up prices and squeezing some Georgians out of parts of the economy like the housing rental and education.

Business leaders also worry that the country could face a hard landing if the war ends and the Russians return home.


Georgia itself fought a brief war with Russia in 2008 over South Ossetia and Abkhazia, territories controlled by Russian-backed separatists.

Now, however, Georgia’s economy is reaping the benefits of its proximity to the superpower – the two share a land border crossing – and a liberal immigration policy that allows Russians and people from many other countries to live , work and establish businesses in the country without. need a visa.

Also, those fleeing the Russian war are accompanied by a wave of money.

Between April and September, Russians transferred more than $1 billion to Georgia via banks or money transfer services, five times higher than in the same months of 2021, according to the Georgian central bank.

That inflow helped push the Georgian Lari to its strongest level in three years.

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About half of Russian arrivals are from the tech sector, according to TBC CEO Butskhrikidze and local media, coinciding with surveys and estimates from industry figures in Russia that point to an exodus of tens of thousands of workers IT highly mobile after the invasion. of Ukraine.

“These are leading, rich people … who come to Georgia with business ideas and drastically increase consumption,” said Davit Keshelava, senior researcher at the International School of Economics of Tbilisi State University (ISET).

“We expected the war to have many negative impacts,” he added. “But it turned out to be very different. It turned out to be positive.”


Nowhere is the impact of new arrivals more evident than in the capital’s housing rental market, where the growth in demand is exacerbating tensions.

Rents in Tbilisi have risen by 75% this year, according to an analysis by TBC bank, and some low-wage earners and students are at the center of what activists say is a growing housing crisis. .

Georgian Nana Shonia, 19, agreed to a two-year deal for a $150-a-month downtown apartment just weeks before Russia invaded. In July, his landlord kicked him out, forcing him to move to a dirty neighborhood on the edge of town.

“It took me 10 minutes to get to work. Now it’s a minimum of 40, I have to take a bus and the subway and I often hit traffic jams,” he said, attributing the change in market dynamics to the growth of the new

Helen Jose, a 21-year-old medical student from India, has been stuck at her friend’s house for a month after her rent doubled over the summer break.

“Before it was very easy to find an apartment. But many of my friends were told to leave, because there are Russians willing to pay more than us,” he said.

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University figures also reported a significant number of students delaying their studies in Tbilisi because they cannot afford accommodation in the city, Keshelava at ISET said.


TBC’s Butskhrikidze said he saw potential in the newcomers to fill skills gaps in the Georgian economy.

“They are very young, educated in technology and have knowledge – for us and for other Georgian companies it is quite a useful opportunity,” he said.

“A key challenge for us is technology. And unfortunately on this side we have to compete with high-tech companies in the United States and Europe,” he added. “To have a quick victory, these migrants are very useful.”

However, economists and businesses remain concerned about the long-term negative effects from the war, and what might happen if the Russians return home.

“We are not building our future plans on newcomers,” said Shio Khetsuriani, CEO of Archi, one of Georgia’s largest real estate development companies.

Even with rising rental prices, Khetsuriani says development companies are reluctant to overinvest in the housing market, especially with prices for materials and equipment rising. While landlords may be cashing in on rising rents, the profit margins for apartment sales have barely changed, he said.

Economists are also careful the boom can not last, and encourage the Georgian government to use healthy tax revenues to pay the debt and build foreign currency reserves while they can.

“We have to be aware that all these factors that drive growth this year are temporary, and do not guarantee sustainable growth in the following years, so caution is needed,” said Bogov to the EBRD.

“The uncertainty is still there and the crisis could hit Georgia with some delay.”

Reporting by Jake Cordell; additional reporting by David Chkhikvishvili; edited by Guy Faulconbridge and Pravin Char

Our standards: Thomson Reuters’ principles of trust.


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