Georgiacountry report

Student : Khatuna BuchashviliSubject:Finance

General InformationGeorgiaArea • Total69,420 km2 (120th)Ethnic groups

83.8% Georgian 6.5% Azerbaijani 5.7% Armenian 1.5% Russian 2.5% others

Main economic activitiesThe 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

•Ethnic groups (2015)69.1% Estonians 5.2% Russians1.7% Ukrainians,0.9% Belarusians;0.6% Finns,0.2% Jews, 2.3% Others•Main industries

•Import goods :machinery and electrical equipment, mineral fuels, chemical products, foodstuffs, plastics, textiles

2008 2009 2010 2011 2012 2013 2014

Esto-nia

1338440

1335740

1333290

1329660

1325217

1320174

1315819

Geor-gia

4382070

4385429

4436391

4469250

4497617

4483800

4490498

250000

1250000

2250000

3250000

4250000

Population

EstoniaGeorgia

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

2008 2009 2010 2011 2012 2013 2014

Estonia 5.5 13.5 16.7 12.3 10 8.6 7.4

Georgia 16.5 16.9 16.3 15.1 15 14.6 12.4

13579

11131517

Unemployment rate

EstoniaGeorgia

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

2008 2009 2010 2011 2012 2013 2014

Estonia 18088 14718 14632 17177 17132 18877 19720

Georgia 2919 2441 2614 3220 3529 3597 3670

2500

7500

12500

17500

22500

Nominal GDP/capita(annual /USD)

Estonia Georgia

2008 2009 2010 2011 2012 2013 2014

Estonia -5.07 -14.6 2.71 8.59 5.03 1.99 2.42

Georgia 2.42 -4.37 5.25 6.47 6.01 3.4 4.37-17.5

-12.5

-7.5

-2.5

2.5

7.5

12.5

Economic GrowthReal GDP per capita

%

Estonia Georgia

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.

2008 2009 2010 2011 2012 2013 2014

Estonia 10.4 -0.0784 2.97 4.98 3.93 2.78 -0.106

Georgia 10 1.73 7.12 8.53 -0.935 -0.515 3.07

-1

1

3

5

7

9

11

Inflation

Estonia Georgia

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.

2008 2009 2010 2011 2012

Estonia 8.07 13.5 11.6 7.07 10.3

Georgia 2.56 6.81 9.11 5.51 5.95

13579

111315

Market capitalisation/annual % GDP

Estonia Georgia

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

Monetary policy Georgia vs Estonia Level of independence 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. 

 Georgia’s 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 state’s foreign currency reserves.

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

2008 2009 2010 2011 2012 2013 2014

Estonia 8.55 9.39 7.76 6.12 5.75 5.36 4.76

Georgia 18.04 17.87 15.85 15 14.81 13.59 11.91

1

5

9

13

17

Lending interest rate

Estonia Georgia

2008 2009 2010 2011 2012 2013 2014

Estonia 10.7 11.23 11.81 0.72 0.777800000000

001

0.769700000000

001

NaN

Georgia 1.49 1.78 1.78 1.69 1.65 1.66 1.77

1

5

9

13

1USD=home currency

Estonia Georgia

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 Taxes available : 6flat taxes Personal Income Tax 20% Taxes VAT 18% Corporate Income Tax 15% Dividend & Interest Income Tax 5% Import tax 0; 5%, 12 % Land tax (property) up to 1%

No payroll tax or social insurance tax No capital gains tax No wealth tax, inheritance tax or stamp duty

Foreign-source income of individuals fully exempted , According to Tax Misery & Reform Index Georgia has the fourth lowest tax burden globally Very strong political commitment to low and simple taxation and improvement of services .Significantly streamlined tax and customs administration geared towards provision of maximum comfort to businesses and investor .

has double taxation avoidance treaties with 47 countries

Estonia•National taxes +local taxes

•personal income tax 20%•VAT 20% ( reduced rate is 9% and 0% in some cases.)•the rate of social tax is 33% (20% for social security and 13% for health insurance).• land tax(between 0.1% and 2.5% of the assessed value of the land•gambling tax(tax is charged also on gambling tables and machines used for games of chance located on licensed premises.)•duty and excise taxes and heavy goods vehicle tax.• Local governments have the authority to impose local taxes•does not impose any gift, inheritance or estate taxes. Various transactions may be subject to payment of state fees (stamp duties).

Revenue Figure 3:structure of revenue Georgia 2008 –2014

year year2008 2009 2010 2011 2012 2013 2014

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%81.18% 83.37% 82.98%89.25% 88.24% 89.58% 89.19%

10.54% 7.38% 8.05%3.25% 3.58% 3.22% 3.44%

8.27% 9.25% 8.97% 7.50% 8.18% 7.21% 7.36%

TaxesGrantsOther revenue

Source:National Bank of Georgia

Expenditures Figure 4 structure of expenditure Georgia 2008 –2014

year year2008 2009 2010 2011 2012 2013 2014

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Compensation of employees

Use of goods and services

Interest

Subsidies

Grants

Social benefits

Other expense

Source:National Bank of Georgia

25%

26%14%

1%

9%

5%3%

9%5%

2008General public services

Defense

Economic affairs

Environmental protection

Housing and community amenities

Health

Recreation, culture and re-ligion

Education

Social protection

30%

15%18%2%

6%

6%

4%

10%

8%

2009

General public services Defense Economic affairs Environmental protection Housing and community amenities Health Recreation, culture and religion Education Social protection

2011

General public

services ; 12.1%

Defense ; 9.7%

Eco-nomic

affairs ; 15.2%

Envi-ronmen-tal pro-tection ;

1.5%

Housing and community

amenities ; 9.3%

Health ; 5.3%

Recre-ation,

culture and re-ligion ; 5.5%

Educa-tion ; 8.8%

Social pro-tection ; 20.8%

2011

General public

services ; 13.0%

Defense ; 9.6%

Eco-nomic

affairs ; 15.7%

Environmental protection ; 1.8%

Housing and community

amenities ; 7.8%

Health ; 6.5%

Recre-ation,

culture and re-ligion ; 4.4%

Educa-tion ; 8.7%

Social pro-tection ; 20.2%

2010

General public

services ; 11.7%

Defense ; 9.0%

Economic af-fairs ; 19.3%

Environmental pro-tection ; 1.1%

Housing and community

amenities ; 6.2%

Health ; 5.2%

Recre-ation,

culture and re-ligion ; 4.9%

Educa-tion ; 9.5%

Social protec-tion ; 21.7%

2012

General public

services ; 11.8%

Defense ; 8.1%

Economic af-fairs ; 16.0%

Environ-mental

protection ; 1.7%

Housing and community

amenities ; 4.1%

Health ; 6.7%Recre-

ation, cul-ture and religion ;

4.2%

Education ; 10.5%

Social protec-tion ; 25.4%

2013

General public

services ; 11.2%

Defense ; 7.3%

Economic affairs ; 15.1%

Environ-mental

protection ; 1.8%

Housing and com-munity

amenities ; 3.7%

Health ; 7.9%Recreation, culture and religion ; 4.5%

Education ; 10.6%

Social protec-tion ; 27.1%

2014 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 of equity capital, other long-term capital, and short-term capital as shown the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. ] FDI is one example of international factor movements 

Portfolio investment include transactions in equity securities, such as common stock, and debt securities, such as banknotes, bonds, and debentures.Portfolio investments are passive investments, as they do not entail active management or control of the issuing company. Rather, the purpose of the investment is solely financial gain. This is in contrast to foreign 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.

2008 2009 2010 2011 2012 2013 2014

Estonia -3.93 4.96 6.36 5.82 1 1.44 2.62

Georgia -29.78 -19.19 -17.81 -18.53 -19.65 -12.95 -17.5

-35

-25

-15

-5

5

Trade Balance(difference between import and export)

Estonia Georgia

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

Current transfers

2008 2009 2010 2011 2012 2013 2014

Estonia 1.5 1.56 1.64 1.78 1.81 2.15 2.02

Georgia 8.32 10.3 10.2 10.7 11.2 12.1 12

1

5

9

13

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

country%GDP

Estonia Georgia

The highest for Georgia was in 2014 For Estonia 2013

2008 2009 2010 2011 2012 2013 2014

Estonia -8.7 2.5 1.8 1.4 -2.5 -0.1 1.1

Georgia -22 -10.6 -10.3 -12.7 -11.7 -5.74 -9.72

-22.5

-17.5

-12.5

-7.5

-2.5

2.5

Current account(balance of payment% of GDP)

Estonia Georgia

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.

2008 2009 2010 2011 2012 2013 2014

Estonia -2.8 -2.4 -6.9 -10.8 -2.3 -0.5 -2.8

Georgia -11.1 -6.29 -5.83 -6.25 -3.88 -5.14 -6.52

-11

-9

-7

-5

-3

-1

FDI investment Balance of payment(% of GDP)

Estonia Georgia

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.

2008 2009 2010 2011 2012 2013 2014

Estonia -2.89 10.6 3.01 -6.93 0.586 2.76 2.56

Georgia -4.87 -0.098000000000

0002

-2.15 -0.92 -5.35 0.23 -1.25

-7.5

2.5

12.5

Portfolio investment Balance of payment(% of GDP)

Estonia Georgia

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 BankThe 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 country’s creditworthiness which has worsened Georgia’s 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 Georgia’s external debt did indeed exceed the economy’s growth rate from 2008 to 2012 whilst it was lower than the economy’s 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.geBluenomicshttp://www.worldbank.org/http://www.theglobaleconomy.comEconomic Policy research centrehttp://www.indexmundi.com/Eurostatwww.mof.ge (Ministry of finance Georgia)

Thank you for your kind attention !