Economies booming with Russian wealth and immigration

Russians cross the border between Russia and Georgia days after President Vladimir Putin announced a mobilization campaign on September 21.

Daru Solakuri | Getty Images News | Getty Images

While many economies are suffering from the impact of Russia’s invasion of Ukraine, a select few countries are benefiting from the influx of Russian immigrants and the attendant riches.

Georgia, a tiny ex-Soviet republic on Russia’s southern border, is among several Caucasian countries and neighboring countries, including Armenia and Turkey, that have seen their economies flourish amid ongoing turmoil.

At least 112,000 Russians have immigrated to Georgia this year, Based on the reports. The first wave reached nearly 43,000 followers Russian invasion of Ukraine on February 24while the second wave – the number of which is difficult to determine – entered after Putin Military mobilization campaign in September.

The initial wave in the country accounts for nearly a quarter (23.4%) of all migrants outside Russia through September, according to An online survey of 2,000 Russian immigrants It was conducted by the Ponars Eurasia research group. The majority of remaining Russian immigrants fled to Turkey (24.9%), Armenia (15.1%), and “other” unspecified countries (19%).

The influx of refugees has had a significant impact on Georgia’s economy – already on the rise after the Covid-19 slowdown – and the Georgian lari, which is up 15% against A strong US dollar so far this year.

We achieved double-digit growth that no one expected.

Michael Kocava

Chair of Economic and Social Policy, Freedom of Information Development Institute

The International Monetary Fund now expects the Georgian economy by 10% in 2022after revising its estimates again this month and more than tripling 3% expected from April.

Among the reasons cited for the rise was the “significant rise in immigration and financial flows caused by the war”. The International Monetary Fund also sees Turkey, the host country, growing by 5% this year Armenia is set to rise by 11% Against the background of “large inflows of external income, capital and labor into the country.”

Georgia has benefited from a huge rise in capital inflows this year, especially from Russia. Russia accounted for Three-fifths (59.6%) of foreign capital inflows to Georgia in October alone – their total volumes increased by 725% year on year.

Between February and October, the Russians Transfer 1.412 billion dollars To Georgian accounts — more than four times the $314 million transferred over the same period in 2021 — according to the National Bank of Georgia.

Meanwhile, the Russians opened more than 45,000 bank accounts In Georgia until September, the number of Russian accounts in the country almost doubled.

‘Highly active’ immigrants

Ukrainian refugees and Russian immigrants fled to Georgia, a former Soviet republic with its own history of conflict with Russia, after that country’s invasion of Ukraine on February 24.

Daru Solakuri | Getty Images News | Getty Images

“We had double-digit growth, which no one expected,” Mikhail Kukava, head of economic and social policy at the Institute for the Development of Freedom of Information (IDFI), told CNBC via Zoom.

Certainly a large proportion of the rally comes after growth has been destroyed during the coronavirus pandemic. But Kocava said it was also indicative of the economic activity of the newcomers. And while the influx of tens of thousands may seem small – even for a country like Georgia, with a modest population of 3.7 million – it is more than 10 times as large. 10,881 Russians arrived during the whole of 2021.

“They are very active. 42,000 randomly selected Russian citizens will not have this impact on the Georgian economy,” Kukava said, referring to the first wave of immigrants, many of whom are wealthy and highly educated. By comparison, he said, the second wave was driven more by leaving through “fear,” rather than economic means.

“Boom turned into a boom”

One of the most notable newcomer influences has been on the Georgia housing market. Real estate prices in the capital, Tbilisi, Up 20% year over year In September, transactions rose by 30%, according to Georgia’s TBC Bank. Rents are up 74% over the year.

Elsewhere, 12,093 new Russian companies were registered in Georgia from January to November this year, more than 13 times the total number created in 2021, according to Georgia’s National Statistical Office.

The Georgian lari is now trading at the highest level in three years.

The Kremlin could use their presence as a pretext for further intervention or aggression.

However, not everyone is enthusiastic about the new prospects for Georgia. As a former Soviet republic that fought a brief war with Russia in 2008, Georgia’s relationship with Russia is complex, and some Georgians fear the social and political impact the arrivals could have.

Indeed, the Hudson Institute, a Washington, D.C.-based think tank, warned that “the Kremlin could use their presence as a pretext for further interference or aggression.”

Kukava worries about the IDF which could also represent a “boom-turned-bump” for the Georgian economy: “It’s a boom-turned-bump when the wealthy Russian government and this pariah country come after them,” he said, referring to Russian immigrants. “This is the primary concern in Georgia.”

“Although they are not a threat in themselves,” Kukava continued, describing the majority of the migrants as “new generation” Russians, the Kremlin could use this as an excuse to come and protect them. That outweighs any economic impact you might have.”

Prepare to slow down

Forecasters seem to take this uncertainty into account. Both the Georgian government and the National Bank have said they expect slower growth in 2023.

The International Monetary Fund also expects growth to drop to around 5% next year.

“Growth and inflation are expected to slow in 2023, against the backdrop of moderating external flows and deteriorating global economic and financial conditions,” the IMF said in its note earlier this month.

“[That] “It indicates that the Georgian government does not expect them to stay,” Kukava said of the Russian arrivals.

According to the Ponars Eurasia survey, conducted between March and April, less than half (43%) of Russian immigrants at the time said they planned to stay in the initial host country for a long time. More than a third (35%) have not decided, almost a fifth (18%) intend to move to another place, and only 3% intend to return to Russia.

“We are in a better position – both the government and the national bank – if we do not base our economic assumptions on the basis that these people will stay,” Kucava added.

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