Foreign direct investments in Georgia declined by 55.2% in the third quarter. According to preliminary data, the volume of direct foreign investments poured into the country in this period stood at $197.7 mln that is 55.2% less than the adjusted data of the III quarter of 2023.
Economist Davit Kikvidze in his conversation with "Commersant" says that the downward trend will cause a chain reaction and will lead to the lari’s devaluation. In his opinion, the reduction of investments will have a negative effect on inflation.
"The negative trade balance is considered to be the Achilles heel of our economy. A reduction in investment will further aggravate the situation. In fact, the country is 80% dependent on imports, and this figure is set to worsen. The reduction in investment will significantly affect the lari’s exchange rate. As you know, foreign investments and forex inflows are one of the main sources to maintain the lari exchange balance. Foreign currency inflows significantly affect the lari’s stability. This will cause the so-called chain reaction that will affect inflation. The lari’s devaluation directly affects the inflation rate. So, the country will have to move to a new economy structure. So to speak, adaptation to the new inflation conditions," David Kikvidze notes.
"Inflation will be followed by a monetary policy tightening, an increase in interest rates. There will be no more talk about economic growth. While the government brags about high economic growth, economic growth figures, unfortunately, do not reflect the real situation in the economy. If this situation continues, our economic crisis will deepen. We can say that the political crisis will develop into an economic crisis," says David Kikvidze.
