Georgian Economy Overview

I Quarter, 2010

www.georgia.gov.ge

www.georgia.gov.ge

Economy is Coming out of Recession

1

The available data of 2010 provide for a good ground for economic optimism and enable to state that the economy is overcoming recession and is on the way to the growth trajectory

The data of Q1’10 are considerably improved as compared to that of 2009 and are quite comparable with Q1’08 when the economic activity was very high

www.georgia.gov.ge

Dynamics of the GDP

• In Q4’2009 the growth of the GDP was 0.4%. This rate, though low from absolute

point of view, is relatively good on an international scale

• Prognosis of the GDP growth in 2010 was determined to be 2%, though actually, it

may be higher

• In 2009 the GDP amounted to 17.9 bln GEL

2

-20

-15

-10

-5

5

Pola

nd

Geo

rgia

*

Uni

ted

Stat

es

Switz

erla

nd

Fran

ce

Belg

ium

Port

ugal

Japa

n

Nor

way

Swed

en

Aust

ria

EA16

Net

herl

ands

EU27

Ger

man

y

Gre

ece

Cypr

us

Slov

akia

Ital

y

Spai

n

Den

mar

k

Czec

h Re

publ

ic

Finl

and

Hun

gary

Slov

enia

Bulg

aria

Rom

ania

Esto

nia

Lith

uani

a

Latv

ia

Q4'09 Real GDP Growth Rate for the selected countries

Source: Eurostat,*National Statistics Office of Georgia-GeoStat

Geo

rgia

*

www.georgia.gov.ge

Consumer Price Index and Exchange Rate

3

Inflation

Source: National Statistics Office of Georgia-GeoStat

Inflation in 2009 was limited to 3% (eop)

According to the National Bank of Georgia, inflation by the end of 2010 will total 6%

7.0% 7.5%

6.2%

8.8%

11.0%

5.5%

3.0%4.8%

5.7%

8.2% 9.2%9.2%

10.1%

1.7%

0%

2%

4%

6%

8%

10%

12%

14%

2003 2004 2005 2006 2007 2008 2009

CPI (e-o-p) CPI (period average)

USD/GEL exchange rate index

Source: National Statistics Office of Georgia-GeoStat

2.15

1.91

1.81 1.78

1.67

1.49

1.67

1.72

1.73 1.73

2.08

1.83 1.791.71

1.59

1.66

1.69

1.74

1.74 1.75

1.4

1.6

1.8

2.0

2.2

2003 2004 2005 2006 2007 2008 2009 1m'10 2m'10 3m'10

US$/GEL (period average) US$/GEL (e-o-p)

www.georgia.gov.ge

Foreign Direct Investments of 2009

4

In Q4’2009 the FDI reached 254 mln USD

During 2009 the amount of the FDI increased gradually and totaled 760 mln USD

129.8151.8

223.6253.9

17%

47%

14%

-50%

0%

50%

100%

0

50

100

150

200

250

300

Q1'09 Q2'09 Q3'09 Q4'09F

USD

mln

FDI Inflows (RHS) Q-o-q FDI Growth Rate (LHS)

Source: National Statistics Office of Georgia-GeoStat

www.georgia.gov.ge

Tax Revenues of Q1’10

5

Source: National Statistics Office of Georgia-GeoStat

In Q1’10 tax revenues of the state budget increased by 12.1% as compared to Q1’09

305.

5

263.

1 379.

4

303.

5

319.

6 499.

5

266.

4

266.

0 428.

3*

280.

6

290.

8 505.

1

0

100

200

300

400

500

600

Jan Feb Mar

GEL

mln

2007 2008 2009 2010

* With the exception of the unique customs transfer

www.georgia.gov.ge

Banking Sector

6

According to the data of 4m’10 the deposits amount has increased by 44.5% as compared to4m’09 and totaled 3 587 mln GELFrom October 2009 till April 2010 the loans amount grew by approximately 257 mln GEL andtotaled 5 518 mln GEL

Source: National Statistics Office of Georgia-GeoStat

3.080 3.1063.361 3.427 3.472 3.549 3.587

5.261 5.267 5.248 5.309 5.342 5.417 5.518

2

3

4

5

6

Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10

GEL

Bill

ions

Total Bank Deposits Total Bank Loans

www.georgia.gov.ge

Foreign Trade of Q1’10

• In Q1’10 the exports increased by 54% as compared to

Q1’09, and by 3% as compared to Q1’08 data

• Q1’10 imports exceeded Q1’09 data by 6%, and is less than

27% as compared to Q1’08

• In Q1’10 the trade balance deficit decreased by 8.7% as

compared to Q1’09, and by 37% as compared to Q1’08 data

7

0

25

50

75

100

125

150

Jan Feb Mar

69 68

8796 101

131

6275

83

107 110123

Mln

. USD

Export of Goods

2007 2008 2009 2010

0

100

200

300

400

500

600

Jan Feb Mar

328 335382403

474528

307304

354

278321

421

Mln

. USD

Import of Goods

2007 2008 2009 2010

224 329 220 339

1,0451,405

965 1,020

-821.4-1076.3

-745.2 -680.6

1268.8

1733.9

1185.11358.7

-1,700

-1,200

-700

-200

300

800

1,300

1,800

3m'07 3m'08 3m'09 3m'10

Mln

. USD

Export Import TBD Turnover

www.georgia.gov.ge

Diversified Foreign Trade Q1'10

8

Turkey16%

Azerbaijan14%

Armenia9%

USA8%

Canada7%

Bulgaria7%

Ukraine6%

Germany3%

Romania2%

Netherlands2%

Other Countries26%

Turkey16%

Ukraine10%

Azerbaijan9%

Russia7%

China7%Germany

6%USA4%

UAE3%

Italy3%

Romana2%

Other Countries33%

Iron and steel24%

Vehicles12%

Beverages, spirits and vinegar

8%Ores, slag and ash

7%

Pearls, precious or semi-precious stones

7%

Fertilizers5%

Edible fruit and nuts; peel of melons or citrus

5%

Mineral fuels and products of their

distillation4%

Copper3%

Pharmaceutical products2%

Other Products23%

Mineral fuels and products of their

distillation18%

Vehicles10%

Nuclear reactors, boilers, machinery and mechanical

appliances8%

Electrical machinery and equipment

7%Pharmaceutical products

4%Cereals

3%Articles of iron or steel

3%

Plastics and articles3%

Iron and steel3%

Paper and paperboard2%

Other Products39%

Export

Import

www.georgia.gov.ge

Registration of Real Estate and Motor Vehicles Q1’10

9

Registration of real estate (Q1)

Source: National Statistics Office of Georgia-GeoStat, Public Registry

In Q1’10 the total amount of registrations increased by 25.6% as compared to Q1’09, and by 8% - as compared to Q1’08 data

Registration of mortgage in Q1’10 increased by 70% as compared to the similar indices of Q1’09, and by 6.7% as compared to Q1’08

In Q1’10 680 building permits were issued in Tbilisi, 83.6% more than in Q1’09

Source: National Statistics Office of Georgia-GeoStat

19.4

25.3

31.4

21.8

29.5 28.6

15.8

26.6 26.3

20.9

29.7

35.7

0

5

10

15

20

25

30

35

40

Jan Feb Mar

# of

tran

sact

ions

'000

2007 2008 2009 2010

Registration of motor vehicles in Q1’10 increased by

12.2% as compared to Q1’09

4.4

8.6

11.4

14.8

18.5

13.313.0 12.2

12.8 13

17

Jan Feb Mar

# of

tran

sact

ions

('00

0)

2007 2008 2009 2010

Registration of motor vehicles (Q1)

www.georgia.gov.ge

Consumption of Electric Power for Production Purposes

• In Q1’10 the electric power consumed by the Georgian commercial users increased by 7.3% as compared

to Q1’09, and by 10.4% as compared to Q1’08

• In March 2010 consumption of the electric power increased by 22.7% as compared to the March

2009, and by 14.9% as compared with the March 2008

10

153

145

137

126

123

127 13

2 142

131

129

131

15215

9

149

140

138

127

125 13

0

132

135

127 13

9

15917

0

157

155

58.6 55 57

0

30

60

90

120

150

180

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mln

kw

/h

Non-Residential (Commercial) Energy ConsumptionEnergo Pro and Telasi

2008 2009 2010 o/w Telasi '08 o/w Telasi '09 o/w Telasi '10

www.georgia.gov.ge

Generation of Electric Power

• Hydropower generation in March amounted to 857 mln KW/H. This amount is all-time high

and exceeds the highest level by 7.3% (May 2008 – 799 KW/H)

• Export rate of the electric power in March reached the record figure for this month

11

520

462 63

2 770

799

639 72

6

612

483

520

333 45

4 514 59

8

651

571

557 67

6 773

757

529

452 55

4

558 70

4

658

857

310

236

37 46

8880

158

263228 62

80

69

0

0 0

80128

133204

153118

2137

15189

23

1530

17

96 90

31

24

20 0

1 0

97

54

8425

15

0 0 -5-100 -119

-37 -81 -86-25 -39 -7 0 0 -16 -3 -1

-57-134

-188 -146-26 -15 -25 -29 -35 -29 -69

959

846

742

663 675

608643

596 595 605662

810 832

675

752

659

509542

586 611 592 573

716

817848

761813

-150

50

250

450

650

850

Jan

08

Feb

08

Mar

08

Apr

08

May

08

Jun

08

Jul 0

8

Aug

08

Sep

08

Oct

08

Nov

08

Dec

08

Jan

09

Feb

09

Mar

09

Apr

09

May

09

Jun

09

Jul 0

9

Aug

09

Sep

09

Oct

09

Nov

09

Dec

09

Jan-

10

Feb-

10

Mar

-10

Mln

Kw

/H

Electricity Generation and Balance

Hydropowerplants Termalpowerplants Import Export Consumption (Georgia)

www.georgia.gov.ge

Transportation in Q1’10

• Total cargo transportation in Q1’10 amounted to 10.1 mln

tons which exceeds the rate of Q1’09 by 11%

• The amount of handled cargo by ports in Q1’10 exceeds

the level of Q1’09 by 22%, and the data of Q1’08 by 23%

• Q1’10 handled containers by ports exceeds the rate of

Q1’09 by 11%

12

5.4 5.55.5

4.9 3.6 4.6

10.39.1

10.1

2.92.2

2.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

3m '08 3m '09 3m '10

Mln

Ton

s

Total Cargo Transportation & Mode

Road Railway

Total Cargo Transportation Airway ('000 tons) RHS

1.91.3 1.8

2.6

1.7

2.20.5

0.71.1

0.84.5 4.6

5.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

3m '08 3m '09 3m '10

Mln

ton

s

Handled Cargo by Ports

By Poti Sea Port By Batumi Sea Port By Kulevi Sea Port By Supsa Sea Port Total Handled Cargo

55.842.8

49.4

3.42.0

59

4651

-5

5

15

25

35

45

55

65

3m '08 3m '09 3m '10

Thou

sand

TEU

s

Handled Containers by Ports

By Poti Sea Port By Batumi Sea Port Total Handled Containers

www.georgia.gov.ge

S&P Rating

13

According to the Standard & Poor’s Ratings of April 12, 2010, the long-term credit

rating was improved from ‘B’ to ‘B+’.

“The upgrade reflects our view of Georgia's relative strength compared to its 'B' rated

peers in terms of economic structure and growth prospects. In our opinion, the

government's focus on market-oriented reforms is likely to improve economic and

fiscal indicators over the medium term. The stable outlook reflects our expectation

that the economy will expand over the medium term, further supporting Georgia's

relative position in comparison with the 'B' rated peer group”

www.georgia.gov.ge

Georgian Government Policy

• Georgia has not deviated from the policies of liberal economy

• Georgia did not increase taxes to stimulate economy as opposed to many other countries

• As of end 2009, Georgia entered into contractual commitments for and/or received circa USD

3 billion for public and private sector operations (up to 65% of the total Brussels pledge, circa

28% of 2009 GDP)

• Economic stimulus package provided by the Georgian Government in the infrastructure

sector turned out to be very effective

• Monetary and fiscal policies appeared to be effective which enabled commercial banks to

finance business more actively

14