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29.08.14 - 04.09.14



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Moody’s: Georgia’s Sovereign Rating Changed to Positive from Stable

Moody’s Investors Service has changed the outlook on Georgia’s Ba3 sovereign rating to positive from stable, stating that the key driver of outlook change is the entering into force in September 2014 of Georgia’s Deep and Comprehensive Free Trade Area (DCFTA) with the EU, which according to Moody’s expects will attract further foreign direct investment (FDI) and bolster the country’s export performance. This should in turn support an improvement in Georgia’s external position over the medium term.

The affirmation of the Ba3 rating reflects the combination of external vulnerability and geopolitical risks in the near term, as well as the volatile nature of the Georgian economy.

Enhanced Economic Prospects Following Introduction of the DCFTA

The key driver of Moody’s decision to change the outlook to positive is the medium-term economic benefits offered by the DCFTA signed with the EU on 27 June 2014. This view reflects (1) the opportunity EU market access represents for Georgian exporters, given the size of EU economies relative to Georgia’s own; and (2) the increase in FDI that the agreement is likely to generate, supported by improvements in Georgia’s economic governance and institutional capacity in recent years.

The EU is one of Georgia’s largest trading partners. In 2013, Georgia’s goods exported to the EU accounted for 21% of total goods exports, whilst FDI from the EU - mostly from the Netherlands, Luxembourg and Germany - accounted for 43% of all FDI over the period 2010-13. The DCFTA is expected to strengthen the role of the EU, both as an export destination and source of investment for Georgia, with sectors such as agriculture playing an important role for exports, while the transport, manufacturing, energy (e.g., hydropower-generated electricity), and financial services sectors are expected to benefit from increases in FDI. From 2010 to 2013, the four sectors received 63% of total Georgian FDI.

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Armenian Gas Deal Draws Georgian Budget Concerns

Author: By Zaza Jgharkava

A Georgian is investing $600 million in the Armenian economy, it has been revealed, as the media of Georgia’s neighbors Armenia and Azerbaijan responded to Prime Minister Irakli Gharibashvili’s visit to Yerevan. Later, this information was confirmed by the Georgian media as well. The goals of the agreement between the Armenian government and the Georgian company Anaklia IEP (Industrial Eco Park) Holding were announced by the Kakheti Information Center.

The news has been perceived as sensational. Georgia, whose budget heavily depends on foreign investments, making such a large financial injection to a neighboring country’s economy, instead of its own, has caused alarm

Teimuraz Karchava, owner of 100% of shares of the holding told journalists about the project’s details at the press club of Ria Novosti. The story of businessman Karchava is closely connected to Russia. Like other Georgian businessmen, Karchava accumulated his capital in Russia but not enough to afford an investment of $600 million into another country’s power industry. His interests - Moscow’s VIP club “National”, uniting a casino and a restaurant - would not bring him anywhere near that level of funds.

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