• At least 112,000 Russians are moving to neighboring Georgia
  • Georgia is set to become one of the fastest growing economies
  • Some locals are being deprived of housing and education
  • The economy could face a hard landing if newcomers leave

TBILISI, Nov 8 (Reuters) – As war smothers Europe, a small nation wedged under Russia is enjoying an unexpected economic boom.

Georgia is on track 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 campaign to recruit war recruits.

With much of the world heading into recession, this Black Sea-bordering country of 3.7 million people is expected to post strong 10% economic output growth in 2022 amid a consumption-driven boom, according to international institutions.

That would see the modest $19 billion economy known in the region for its mountains, forests and wine valleys outpace supercharged emerging economies like Vietnam and oil exporters like Kuwait, buoyed by high crude 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 kind of a boom,” he added. “All industries are doing very well, from mics to corporates. I can’t think of any industry that’s struggling this year.”

At least 112,000 Russians have immigrated to Georgia this year, border crossing statistics show. A first large wave of 43,000 arrived after Russia invaded Ukraine on February 24 and Putin wanted to quell opposition to the war at home, according to the Georgian government. A second wave came after Putin announced the nationwide mobilization campaign in late September.

Georgia’s economic boom – whether short-lived or not – has puzzled many experts, who saw the war’s dire consequences for the former Soviet republic, whose economic fortunes are closely linked to its larger neighbor through exports and tourism.

The European Bank for Reconstruction and Development (EBRD), for example, predicted in March that the Ukraine conflict would deal a severe blow to the Georgian economy. Likewise, the World Bank forecast in April that the country’s growth would slow to 2.5% in 2022 from the original 5.5%.

“Despite all the expectations we had…that this war against Ukraine will have a significant negative impact on the Georgian economy, we do not see these risks materializing so far,” said Dimitar Bogov, the EBRD’s chief economist for Eastern Europe and the Caucasus.

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

But not everyone has benefited from the steep growth, as tens of thousands of Russians and many tech experts arrive with big pockets, driving up prices and pushing some Georgians out of parts of the economy like housing and education.

Business leaders also fear the country could face a hard landing should the war end and the Russians return home.


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

Now, however, Georgia’s economy benefits from 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 start businesses in the country without needing a visa .

In addition, the refugees from Russia’s war are accompanied by a wave of money.

According to the Central Bank of Georgia, between April and September, Russians sent more than $1 billion to Georgia through banks or money transfer services, five times more than in the same months of 2021.

This inflow has helped push the Georgian lari to its strongest level in three years.

According to TBC CEO Butskhrikidze and local media, about half of Russia’s arrivals are from the tech sector, consistent with surveys and estimates by industry insiders in Russia, which pointed to an exodus of tens of thousands of highly mobile IT workers following the invasion of Ukraine.

[1/3] A man carries a bag on his head as he travels from Russia across the border into Georgia at Zemo Larsi/Verkhny Lars railway station, Georgia, September 26, 2022. REUTERS/Irakli Gedenidze/File Photo

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

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


Nowhere is the impact of the newcomers more evident than in the capital’s rental housing market, where rising demand is fueling tensions.

Rents in Tbilisi have risen 75% this year, according to an analysis by TBC Bank, and some low-income earners and students are finding themselves at the center of what activists call a growing housing shortage.

Georgian Nana Shonia, 19, signed a two-year deal for a downtown apartment for $150 a month just weeks before Russia invaded. In July, her landlord threw her out and forced her to move to a rough neighborhood on the outskirts.

“It used to take me 10 minutes to get to work. Now it’s at least 40, I have to take a bus and subway and I often get stuck in traffic,” she said, attributing the change in market dynamics to the surge of newcomers.

Helen Jose, a 21-year-old medical student from India, has been sleeping with her friend for a month after her rent doubled over the summer holidays.

“It used to be very easy to find an apartment. But so many of my friends have been asked to leave because there are Russians who are willing to pay more than us,” she said.

University officials have also reported that a significant number of students are delaying their studies in Tbilisi because they cannot afford accommodation in the city, ISET’s Keshelava said.


According to the Georgian government, Russians accounted for about 75% of total migrants from Russia, Ukraine and Belarus to Georgia this year through the end of September, with 26,000 Ukrainians and 13,000 Belarusians also arriving.

TBC’s Butskhrikidze said he sees potential in some newcomers who are filling the skills gap in the economy.

“They are very young, technically educated and knowledgeable – for us and other Georgian companies this is a very useful opportunity,” he said. “A key challenge for us is technology. And unfortunately, on that side, we compete with high-tech companies in the United States and Europe.”

Still, economists and businesses remain concerned about the longer-term negative effects of the war and what might happen when the Russians return home.

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

Even with rents rising, Khetsuriani says developers aren’t keen on investing too much in the housing market, especially with rising prices for materials and equipment. While landlords may benefit from rising rents, profit margins on home sales have changed little, he said.

Economists also warn the boom may not last, and encourage the Georgian government to use healthy tax revenues to pay down debt and build up foreign exchange reserves while they can.

“We must be aware that all of these factors driving growth this year are temporary and do not guarantee sustained growth in the years to come, so caution is advised,” said the EBRD’s Bogov.

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

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

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