Analysis

The President of the National Bank of Georgia, Koba Gvenetadze, on air on the PalitraNews broadcast, Saqme, stated: “If in 2014 the share of remittances from Russia constituted 50% of the total remittances, this figure is halved today and amounts to 25%.” The context of this statement highlights the lesser amount of damage that a decrease in remittances from Russia can potentially inflict upon Georgia.

As a result of Russia’s refusal to cooperate with the Organization of the Petroleum Exporting CountriesOPEC+ and its leader Saudi Arabia, on 9 March 2020, world oil and financial markets had an unprecedented collapse. At the same time, the outbreak of the novel coronavirus (COVID-19) opened the door for a world economic crisis. Given this situation, world oil prices have decreased sharply by 26% whilst GEL depreciated vis-à-vis USD to a historic minimum. According to the official exchange rate of the National Bank, the USD to GEL exchange rate was 1 to 3.18.

In late 2014, there was a similar situation in terms of the GEL exchange rate and the oil price dynamic when almost halved oil prices was followed by an appreciation of USD vis-à-vis almost all other currencies. This shift in the economic conjuncture was especially painful for oil-exporting countries, including Russia. According to Koba Gvenetadze’s statement, remittances from Russia constituted 50% of the total remittances in that period which was translated into Georgia’s vulnerability for being dependent upon a sizeable share of remittances from Russia.

Graph 1: Total Remittances and Remittances from Russia in 2014-2020 (two months), USD Million

Source: National Bank of Georgia

In 2014, the total volume of remittances was USD 1.4 billion whilst remittances from Russia amounted to USD 709 million; that is, 49% of the total remittances. In the following years, we have trend of decline of remittances from Russia both in absolute and relative values. The relative figure was 25% as of 2019, 21% as of January-February 2020 and 23% taken separately as of February 2020. In spite of the aforementioned dynamic, Russia regularly tops the list of those countries with sizeable remittances to Georgia. The dependency, to which the President of the National Bank was referring, has been substantially decreased, although it still remains as a significant challenge and leaves Georgia vulnerable vis-à-vis the current reality on the ground.