Issue 37: Real GDP & FDI, I-III Q 2014

In the first three quarters of 2014, real GDP increased (5.9%; 645 mln.GEL) compared to the corresposding period in 2013. The largest contributions to the real GDP growth have the following sectors: construction (1.2 percentage point), manufacturing (1.1 percentage point) and trade (1.1 percentage point).

In this period, the volume of the Foreign Direct Investment (FDI) also increased (29.1%; 208.3 mln.USD), basically due to the significant increase of FDI (99.2%) in the third quarter of 2014. It is noteworthy, that since 2008, such large inflow of FDI have not been in any quarter. In the first three quarters of 2014, the volume of FDI equals to 923.3 mln.USD.

Source: GeoStat

Source: GeoStat

In the first three quarters of 2014, the structure of the real GDP is similar to the structure in the corresponding period in 2013. Transport and communication (16.7%), trade (14.6%), manufacturing (12.9%) and agriculture (9.8%) sectors produce 54.0% of the total GDP. In this period, the highest growth were in the following sectors: construction (16.3%), financial sector (10.6%) and financial intermediation (10.5%).

Real GDP increased in I (7.2%), II (5.2%) as well as in III quarters (5.6%) of 2014. It should be noted, that based on the preliminary data the GDP growth rate declined in October and equals to 3.5%. Moreover, the indicator of November is even negative (-0.5%). In November 2013 the real GDP growth rate was 8.0%.

FDI increased in I (5.2%) and III (99.2%) quarters, while it reduced in II quarter (-26.7%) of 2014. In the first three quarters of 2014, the largest increase of the FDI flow was in the following sectors: construction (312.7%; 157.4 mln.USD), transport and communication (122.1%; 139.6 mln.USD) and manufacturing (167.6%; 95.4 mln.USD), while the largest reduction was in energy (-52.9%; -104.1 mln.GEL) and financial sectors (-100.2%; -128.2 mln.USD).

Source: GeoStat

Source: GeoStat

In the first three quarters of 2014, the top three investors by country in Georgia are: Netherlands (28.6%), Azerbaijan (23.7%) and China (17.0%). FDI structure by country in 2014 has slightly changed compared to the same period in 2013. The top three largest investors of FDI in 2013 are: Luxembourg (18.2%), Netherlands (14.7%), and China (12.7%).

In the first three quarters of 2014, the structure of FDI by economic sectors changed compared to the same period in 2013. In this period, the top three economic sectors in terms of the largest FDI flow are: transport and communication (27.5%), construction (22.5%) and manufacturing (16.5%). While in 2013, the FDI structure by economic sectors was the following: energy (27.5%), financial services (17.9%) and transport and communication (16.0%).

In the first three quarters of 2014, the construction sector has the largest share (1.2 percentage points) in the real GDP growth (5.9%).

In this period, the production value in the construction sector (28.1%; 530.0 mln. GEL), as well as the turnover (33.3%; 551.9 mln. GEL) and the number of individuals employed (6.3%; 2878 people) increased. Hence, the real growth rate of the sector is also high (16.3%; 135.7 mln. GEL).

In this period, FDI in the construction sector also increased (312.7%, 157.4 mln. USD) and equals to 207.7 mln. USD, which is the 22.5% of the total inflow of the FDI in the country.

It is worth mentioning, that the investments made in the construction sector will have a positive impact on the growth rate of this sector in the next periods, because FDI is characterized by the time lag.

Source: GeoStat

Source: GeoStat

In the first three quarters of 2014, after the construction sector, the largest share in the growth rate of GDP has the manufacturing sector (1.1 percentage points).

In this period, the production volume in the manufacturing sector increased (12.6%; 621.2 mln. GEL), also increased the turnover (13.0; 726.5 mln. GEL) in this sector, while the number of individual employed decreased (-4.1%; -4527 people). The growth rate of this sector is 6.7% (116.4 mln. GEL).

In mentioned period, the FDI flows in manufacturing sector also increased (173.7%, 97.4 mln. USD) and equals to 186.7 mln. USD, which is the 20.2% of the total inflow of the FDI in the country.

The third sector, which has one of the largest shares (1.1 percentage points) in the real GDP growth is trade.

In the first three quarters of 2014, the production volume in the trade sector increased (16.8%; 439.0 mln. GEL), as well as the turnover (13.8%; 2097.7 mln. GEL) and the number of persons employed (8.9%; 9490 people) in this sector did. As a result, the real growth rate of the sector is 8.0% (123.5 mln. GEL).

It is very interesting to analyse the FDI inflows in the trade sector, however, this indicator is not recorded separately by the national statistics office of Georgia.

 Source: GeoStat