Economies boom with Russian wealth, migration

Russians crossed the Russian-Georgian border days after President Vladimir Putin announced the mobilization on September 21.

Daro Sulakauri | Getty Images | Getty Images

As the economy shrinks due to Russia’s invasion of Ukraine, several countries are benefiting from the influx of Russian immigrants and their emerging economies.

Georgia, a small former Soviet republic on Russia’s southern border, is among the Caucasus and surrounding countries, including Armenia and Turkey, which have seen their economies improve amid the ongoing turmoil.

About 112,000 Russians have moved to Georgia this year, according to reports. The first wave of nearly 43,000 arrived after Russia’s invasion of Ukraine on Feb. 24, when the second wave – the number of which is difficult to determine – entered after Putin’s army in September.

The country’s first waves make up about a quarter (23.4%) of all people leaving Russia until September, according to an online survey of 2,000 Russians emigrating to Russia by the Ponars Eurasia research group. Most of the remaining Russians have fled to Turkey (24.9%), Armenia (15.1%) and “other” unspecified countries (19%).

The increase has had a major impact on the Georgian economy – which is on the verge of a Covid-19 recession – and the Georgian lari, which has risen 15% against. the strong US dollar until this year.

We have had double digit growth, which no one expected.

Mikheil Kukava

head of economic and social policy, Institute for Development of Freedom of Information

The International Monetary Fund now expects Georgia’s economy to grow by 10% in 2022, revising its estimate this month to triple the 3% forecast from April.

“Increased immigration and economic growth caused by the war,” were among the reasons cited for the rise. The IMF also sees partner Turkey growing 5% this year, while Armenia is expected to grow 11% on the back of “significant foreign investment, investment, and employment in the country.”

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Georgia has benefited from a large amount of inflows this year, especially from Russia. Russia accounted for three-fifths (59.6%) of Georgia’s foreign capital in October alone – a total volume that increased by 725% year-on-year.

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

Meanwhile, Russians opened more than 45,000 bank accounts in Georgia through September, nearly doubling the number of Russian accounts in the country.

‘Eager’ migrants

Georgia’s excellent location and its historical and economic ties with Russia make it attractive to Russians. Currently, its immigration laws allow foreigners to live, work and set up businesses without the need for a visa.

Like Armenia and Turkey, the country has refused to impose Western sanctions on the pariah state, leaving Russians and their money to move freely across its borders.

Turkey, for its part, has granted residence permits to 118,626 Russians this year, according to government data, while one-fifth of its foreign trade in 2022 will be Russian. The Armenian government did not provide statistics on immigration or property purchases when contacted by CNBC.

However, the economic crisis has surprised even the experts.

Both Ukrainian and Russian refugees who immigrated to Georgia have fled to Georgia, a former Soviet Union country with a history of hostility to Russia, after the country invaded Ukraine on Feb. 24.

Daro Sulakauri | Getty Images | Getty Images

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

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In fact, much of the growth comes after growth slowed during the coronavirus pandemic. But Mr. Kukava said this also shows the economic activities that have recently come. And although the number of thousands may seem small – even for a country like Georgia, which has a population of only 3.7 million – it is more than 10 10,881 Russians who arrived in 2021 as a whole.

“They are very active. 42,000 randomly selected citizens of Russia would not have this effect on the economy of Georgia,” said Kukava, referring to the first wave of immigrants, most of them wealthy and highly educated. The second wave, by comparison, was willing to leave out of “fear,” he said, rather than financial means.

‘Boom turned into bang’

One of the bright spots for newcomers has been the real estate market in Georgia. Property prices in the capital, Tbilisi, rose 20% year-on-year in September and activity rose 30%, according to Georgian bank TBC. Rent rose 74% year-on-year.

Elsewhere, 12,093 new Russian companies were registered in Georgia between January and November this year, 13 times more than the total number established in 2021, according to the National Statistics Office of Georgia.

The Georgian lari is now trading at a three-year rate.

The Kremlin could use their presence as a pretext for disruption or violence.

However, not all people are interested in the state of Georgia. As a former Soviet Union country that fought a brief war with Russia in 2008, Georgia’s relationship with Russia is strained, and some Georgians fear that the arrivals could become politically involved.

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Indeed, the Washington, DC-based think tank Hudson Institute has warned that “the Kremlin could use their presence as a pretext for disruption or violence.”

IDFI’s concern about Kukava which may also reflect the “economic boom” of the Georgian economy: “‘Boom turned bang’ is when the plutocratic government of Russia and the pariah state are coming after them,” he said, referring to Russian immigrants. “That’s a big problem in Georgia.”

“Even if they are not in any danger,” Mr. Kukava continued, saying that most of the refugees are the “new generation” of Russia, “The Kremlin can use this as a warning to come to protect them.

To reduce the deficit

Forecasters seem to be taking this uncertainty into account. The Government of Georgia and the National Bank have said that they expect growth to slow down in 2023.

The IMF also sees growth slowing to around 5% next year.

“Growth and inflation are expected to slow in 2023, due to the decline in foreign exchange, the global economic slowdown,” the IMF said in a statement earlier this month.

“[That] it shows that the Georgian government does not expect them to stay,” said Mr. Kukava about those who have arrived in Russia.

According to the Ponars Eurasia survey, which was conducted between March and April, less than half (43%) of Russian immigrants said at that time that they wanted to stay in their host country for a long time. More than a third (35%) were undecided, almost a fifth (18%) wanted to move elsewhere, and only 3% planned to return to Russia.

“We are better – the government and the National Bank – if we don’t base our economic decisions on the basis that these people will remain,” added Kukava.

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