Georgia adopts 2009 budget


The parliament in Georgia adopted a 2009 budget on Tuesday, with a growth target of 2.5 percent as the country struggles with the economic sequel of the global financial crisis and a disastrous war with Russia.

Overall 2008 GDP is expected to slow to a 2.0 percent expansion, down from double-digit growth before Georgia’s five-day war with Russia in August reined in foreign investment. The Georgian economy grew 12.4 percent in 2007.The 2009 budget targets inflation of around 7.0 percent with revenues forecast at 6.3 billion Gel ($3.8 billion) and spending at 6.8 billion Gel.The budget earmarks 1.5 billion Gel for spending on social needs, up 193 million Gel on 2008. Just under 1 billion Gel has been set aside for the defense sector.The budget envisages an increase in the state pension. ($1=1.66 Georgian Gel) GDP growth at 2% is expectedGeorgia’s economy is expected to grow 2 percent in 2009, slightly up on 2008, and inflation is likely to drop to 3-4 percent as the country wrestles with the global financial crisis.Georgia was hit hard in 2008 by a war with Russia in August and the onset of the financial crisis, but analysts say its relatively small economy could be better placed than others in the former Soviet region to ride out the storm.The growth in 2008 is estimated at 1.5 percent.The Georgian economy grew more than 12 percent in 2007 on the back of foreign investment attracted by the pro-Western government of President Mikheil Saakashvili.But the war — when Russia repelled Tbilisi’s military assault on separatists in South Ossetia — scared off investors just as the financial crisis began to take hold, compounding the political pressure on Saakashvili over the conflict.TBC Bank plans to sell its sharesTBC Bank, Georgia’s No. 2 lender by assets, plans to sell around 20 percent of its shares to an international consortium next month as it seeks to raise $160 million to offset the global financial crisis.TBC aims to sell the stake to the International Finance Corp (IFC), the European Bank for Reconstruction and Development (EBRD) and Dutch development bank FMO.The bank is trying to bring in $160 million, in part to help pay off a $100 million loan from Merrill Lynch. It aims to attract about $80 million in share capital and as a subordinated loan, plus another $80 million as a loan from new shareholders.Growth among Georgia’s commercial banks deacreased last year to about 10 percent, a marked reduction on the 70 percent growth rates in assets and loan portfolios experienced in 2007.August war events last year only worsened the situation. Preliminary data shows 2008 gross domestic product (GDP) growth in Georgia slowed to 2 percent from 12.4 percent in 2007.TBC Bank was founded in 1992 by a group of Georgian citizens. The IFC and Germany’s DEG, part of state banking group KfW, are already among its shareholders.After the new shares were issued, TBC Bank will still be controlled by Georgian shareholders.Growth of 10-15 percent in TBC Bank’s assets in 2009 and potential profit of $18 million this year is forecasted. The bank lost $36 million in 2008.TBC Bank had to put $95 million in reserve to compensate possible non-payments on some bad loans. TBC Bank planned to attract an additional $50 million from international markets by the end of September. The bank currently has assets worth $1.2 billion.Georgian Delivery Of Russian Gas To Armenia To Resume YEREVAN — Russian natural-gas deliveries to Armenia via a pipeline passing through Georgian territory will be fully restored on January 13.Amenia’s state gas company, ArmRosGazprom, said that the repair of the Ghazakh-Sagoramo pipeline in Georgia is nearly complete.The pipeline — which passes through the Azerbaijani-populated Gardabani district of Georgia — is the key source of gas supplies to Armenia.Georgia suspended the flow of gas on January 9, citing emergency repairs on the key pipeline.Georgian Energy Minister Aleksandre Khetaguri said the pipeline was seriously damaged by increased gas pressure that he said was due to a seasonal rise in consumption in Armenia.WB relocates South Caucasus office from Washington to Tbilisi, assigns new directorThe World Bank delegation led by Shigeo Katsu, regional vice-president for Europe and Central Asia, introduced on 29 January to the Georgian government and media the new regional director for the South Caucasus, Asad Alam; he replaces Donna Dowsett-Coirolo in the post. The new regional director will now be based in Tbilisi, along with selected international experts. This, according to WB, is part of the decentralization strategy aimed at bringing its support “closer to its clients.”The delegation held high level discussions with President Mikheil Saakashvili, Minister of Finance Nikoloz Gilauri, Minister of Economic Development Lasha Zhvania and Health, Labor and Social Affairs Minister Sandro Kvitashvili, as well as representatives of the donor institutions to discuss development priorities for Georgia in the face of the global financial crisis.