At a time when the war is drowning Europe, a small country is “wedging” under Russia, captures an unexpected economic surge. OUR Agriculture is on its way to becoming one of the fastest growing economies on the planet, and the main reason is the influx more than 100,000 Russians on its territory, since the beginning of the Russian invasion of Ukraine in February last year, and also after the mobilization announced by Putin a few months ago. Two events that turned thousands of Russians towards a neighboring country.

So while the planet faces the specter of a recession, With a population of 3.7 million, Georgia is expected to record a massive 10% growth spurt by 2022., mainly due to consumption indicators. Results that push this small $19 billion economy to outperform emerging economies such as Vietnam, but also oil exporters such as Kuwait.

According to official figures, at least 112,000 Russians emigrated during the year. The first wave, when Moscow’s invasion of Ukraine began, numbered about 43,000 citizens, and the movement was boosted by the Kremlin’s mobilization last September.

Georgia’s economic boom – whether short-lived or not – baffled many experts who initially saw the terrible consequences of the war for the former Soviet republic. And this is because economically it is traditionally closely connected with Russia through exports and tourists.

Significantly, the European Bank for Reconstruction and Development (EBRD), for example, predicted in March that the conflict in Ukraine would deal a significant blow to the Georgian economy. Similarly, the World Bank predicted in April that the country’s growth would fall to 2.5% by 2022 from an initial 5.5%. Estimates refuted in practice.

In Georgia, with 1 billion

Georgia itself was embroiled in a brief war with Russia in 2008. Now, however, the country’s economy is benefiting from proximity to a major power with which it shares a common border, as well as liberal immigration policies.This allowed the Russians to live, work and open a business on their territory without a visa.

However, the most important factor is that Russians immigrating to the country are usually accompanied by a wad of money. The numbers are impressive. From April to September, Russians transferred more than a billion dollars to Georgia. This is five times higher than the corresponding figure in 2021, the Central Bank of the country reports. These inflows have pushed the national currency to the best levels in the last three years.

Almost half of the Russians who immigrated to Georgia work in the high-tech sector. “These are high-level wealthy people … who come to Georgia with business ideas and dramatically increase consumption,” David Keshelava, a researcher at the University of Tbilisi, told Reuters. “We expected that the war would have negative consequences. But things turned out differently,” he adds.

housing crisis

The impact of the foregoing is nowhere more decisive, both in the Georgian capital Tbilisi and specifically in the housing sector, where, however, the demand for rental housing is explosive and causing tension.

According to the Central Bank, Rent increases even reach 75% in the city. As a result, low-wage workers and students are at the center of what many call the great housing crisis.

A typical example is 19-year-old Georgian Nana Sonya. He agreed to rent an apartment for $150 a month shortly before Russia’s invasion of Ukraine, he told Reuters. In July, the landlord kicked her out of the house and moved to a rundown area. There are several similar pieces of evidence describing the problem that have a common denominator: many homeowners kick locals out of their homes simply because Russians are willing to pay much more. According to Tbilisi University, in factquite a few students are forced to “freeze” their studies because they cannot find a house they can pay for.

The medal of this mass Russian immigration has two sides. On the one hand, the arrivals fill in the gaps in the Georgian economy. “They are young, with a high level of education in the field of technology and for us, but also for other enterprises, this is a great opportunity,” says the head of TBC Bank. “Technology is a big problem for us. And, unfortunately, we have to compete with large companies from Europe and the USA. So for a…quick win, Russian immigrants are changing the game for us.”

Fear of the “bubble”

However, on the other hand, economists and businesses remain concerned about the long-term implications: what will happen when the war is over and the Russians return to their country? “We are not building our future by relying on those who come to the country for a while,” the CEO of one of the largest real estate companies tells Reuters.

According to him, even with rising rental prices, developers do not want to invest too much in the housing market, especially with rising prices for materials and equipment. Thus, while homeowners are cashing in on inflated rents, profits from apartment sales have barely changed.

Economists also warn that the growth “boom” will not last long.urging the government to confiscate healthy tax revenue to pay down debt and build foreign exchange reserves while…it can.

“We need to understand that all of these growth drivers have an expiration date and do not guarantee a sustainable continuation in the coming years. Caution is needed,” the EBRD representative warns. “Uncertainty persists and the crisis may have passed, but it will probably hit the country belatedly.”

Source: Reuters.