Bank of Georgia Growth and Reform Strategy

GEORGIA'S KEY ECONOMIC DRIVERS Top performer globally in WB Doing Business over the past 12 years Liberal economic policy Regional logistics and tourism hub Strong FDI Support from international community Electricity transit hub potential Political environment Liberty Act ensures a credible fiscal and monetary framework Fiscal deficit/GDP capped at 3%; Government debt/GDP capped at 60% Business friendly environment and low tax regime (attested by favourable international rankings) A natural transport and logistics hub, connecting land-locked energy rich countries in the east and European markets in the west Access to a market of 2.8bn customers without customs duties: Free trade agreements with EU, China, CIS, Turkey, Hong Kong and with EFTA countries. The GSP with USA, Canada and Japan Tourism revenues on the rise: tourism inflows stood at 18.7% of GDP in 2019 and total international arrivals reached 9.4mln visitors in 2019 (up 7.8% y-o-y), out of which tourist arrivals were up 6.8% y-o-y to 5.1mln visitors. Regional energy transit corridor accounting for 1.6% of the world's oil and gas transit volumes An influx of foreign investors on the back of the economic reforms FDI stood at US$ 1.3bln (7.2% of GDP) in 2018 FDI averaged 8.8% of GDP in 2010-2018 Georgia and the EU signed an Association Agreement and DCFTA in June 2014 Visa-free travel to the EU is another major success in Georgian foreign policy. Georgian passport holders were granted free entrance to the EU countries from 28 March 2017 Discussions commenced with the USA to drive inward investments and exports Strong political support from NATO, EU, US, UN and member of WTO since 2000; Substantial support from DFIs Developed, stable and competitively priced energy sector Only 25% of hydropower capacity utilized; 150 renewable (HPPS/WPPS/SPPs) energy power plants are in various stages of construction or development Georgia imports natural gas mainly from Azerbaijan Significantly boosted transmission capacity with 400 kV line to Turkey and 500 kV line to Azerbaijan built, other transmission lines to Armenia and Russia upgraded Additional 2,000 MW transmission capacity development in the pipeline, facilitating cross-border electricity trade and energy swaps to Eastern Europe Georgia underscored its commitment to European values by securing a democratic transfer of political power in successive parliamentary, presidential, and local elections and by signing an Association Agreement and free trade agreement with the EU Constitution amendments passed in 2013 to enhance governing responsibility of Parliament and reduce the powers of the Presidency Member of WTO since 2000, allowed Russia's access to WTO; In 2013 trade restored with Russia Despite resumed economic ties, exposure to Russia remains moderate. In 2019, Russia accounted for 13.2% of Georgia's exports and 10.8% of imports; just 3.6% of cumulative FDI over 2003-9M19 BANK OF GEORGIA 40

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