The Investment Case for Georgia Post COVID-19

The Investment Case for Georgia Post COVID-19

The republic of Georgia has been called the world’s most beautiful country, yet only little is known about it beyond its borders. According to IMF data Georgia is the 118th largest economy in the world. Global investors tend to classify Georgia
as part of Central and Eastern Europe & CIS „Commonwealth of Independent States“…

Over its 3,000-year-old history, Georgia has been ruled by everyone from the Greeks to the Ottomans, became a coveted part of the Russian Empire for a hundred years, and was incorporated into the Soviet Union in 1921. In twenty-five years, Georgia has undergone a dramatic socioeconomical and political transformation, and although its political situation remains precarious, Georgia’s strong sense of nationhood and excellent ease of doing business and low levels of corruption are reinvigorating the country and could offer interesting investment opportunities for global investors. The IMF for Georgia predicts post covid -19 GDP forecasts of 5.8% to 6% higher country growth than Most of Middle East & Central Asia and emerging and developing EU in its 2022 to 2025 forecasts. Also still under appreciated by many investors is that as of January 2021, Georgia is preparing to formally apply for EU membership in 2024.

The World bank stated that the World Bank is ready to support Georgia in preparing an official application for EU membership by 2024.

Many western investors are familiar with excellent Georgian cuisine and great Georgia wine to be found in all ex- soviet union countries. Students of history might associate Georgia as the birthplace of Ioseb Besarionis dze Jughashvili; aka Joseph Vissarionovich Stalin as well as Eduard Shevardnadze, as Georgia’s former first secretary, them later Gorbachev’s soviet union last foreign minister.

Several Georgian banks like TBC Bank and Bank of Georgia are listed in London on the London stock Exchange and have historically been favorites of emerging and frontier market fund managers, while mostly being overlooked by traditional private banks and private wealth clients. According to Bloomberg data Bank of Georgia trades at an estimate P/E Price- earnings ratio of 4.41 and a P/B (price-to-book) ratio of 0.94, with tier 1 Capital ratio of 10.4% and NIM (net interest margin) of 4.6%. Global investors in bank stocks should note that Georgia as a country with banking sector NIM 6.85 ranks 40th highest net interest margin country in the world. Attractive fundamental valuation makes Bank of Georgia a true definition of a value stock in my view. The analyst community at the moment tend to agree. According to Bloomberg data, Analyst consensus rating BUY ratings for Bank of Georgia stand at 81.8% and the average analyst 12 month TP (target price) of GBP of 17.02 implies potential gain + 60.9% from current levels and is one of the highest % target price implied gain estimates for listed emerging and frontier market banks. Among banks covering the stock, New York-based Independent securities and investment banking Jefferies Financial Group (widely known as Jefferies) is amongst the most bullish on the stock with TP of GBP 22.40 implying potential gain of 112% on the stock.

At the end of last year Georgia has ranked 37th among 180 countries in the Global Sustainable Competitiveness Index.

Georgia with an overall score of 77.2 currently ranks #12 out of 180 countries in ECONOMIC FREEDOM according to the heritage foundation. the republic of Singapore with overall score of 89.7 tops the global 2021 index of economic freedom.

During the past decade, Georgia’s pursuit of economic reforms led to impressive economic growth, capital inflow, and investments. It helped improve the business environment and infrastructure, strengthened public finances, and liberalized trade.

The World Bank ranked Georgia one of the most active cryptocurrency areas in the world.

According to Cambridge Centre for Alternative Finance, global cryptocurrency benchmarking study, Georgia is now ranked second in the world for cryptocurrency mining — behind only China. Post coronavirus, both the open pubic bitcoin blockchain economy and bitcoin as a currency/reserve asset will can more traction in my view.

Still unnoticed by many global investors is that Georgia Ranks 7th in the World for Ease of Doing Business, Georgia’s economic freedom score is 77.2, making its economy the 12th freest in the 2021 Index. Its overall score has increased by 0.1 point, primarily because of an improvement in the government spending score, as Georgia remains an official aspirant for NATO membership. NATO membership and potential discussions to join the European union Have led to worsening relations with regime of Vladimir Putin ad Russia.

In January, European Council President Charles Michel reiterated strong support of the European Union for Georgia’s territorial integrity and support against its’ conflict with President Putin’s Kremlin.

According to the Georgian National Wine Agency. Georgia exported 94 million bottles of wine to 53 countries in 2019, which is nine percent more compared to 2018 and the highest export volume in the history of independent Georgia. the Russian federation is Georgia’s largest export market for wine. Putin’s Russia Raised Pressure on Georgia and Blamed the U.S. for local Protests in June of last year as Russia targeted Georgia’s wine exports by imposing bans days after banning direct flights from Russia to Tbilisi. According to Georgia’s National Tourism Administration, Russia topped the list of visitors in 2018 with 1.4 million out of 8.6 million tourists. Mr Putin introduced a flight ban to and from Georgia following protests in Tbilisi against Russia’s continued illegal occupation of Georgia’s Abkhazia and Tskhinvali (South Ossetia) territories. Tourism from Europe and Asia is expected to pick up again post Covid-19 and Georgia wine exports most probably will find other export markets to compensate for the lost sales to Russia going forward. Benefits from diversified economic linkages and economic base ( free trade with EU and China) are expected to matter most post covid and for investors in Georgia. Georgia’s good track record of fiscal discipline and strong donor support is expected to led the country out of the global pandemic crisis. Georgia’s 3rd lowest tax burden globally according to the world bank with 0%tax on corporate income tax and retained earnings should give the country a solid edge in the post corona virus re-opened global economy. Georgia ranks 28th out of 200 countries world-wide on the global Business bribery Index. Georgia ranks higher than both Italy and Israel and the united Arab Emirates. Singapore as one of the best business environments globally in comparison ranks 15th out of 200. Russia considers Georgia its “ near Abroad”. U.S. President Joe Biden can push back Russia by supporting its neighbors in the Caucasus, Georgia in particular.

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