Georgia’s agricultural production delivered strong growth of 12.1% y/y in 2013 and accounted for 9.3% of GDP. Agricultural investments in Georgia have increased significantly in 2013, however FDI was only 3.5% of the total FDI inflows. Agricultural exports received a boost last year with the re-opening of the Russian market. Exports to Russia ran up to US$ 107mn last year, almost at the level of US$ 129mn in 2005, just before the Russian embargo was introduced. Many agriculture support programs have been launched by the government in 2013, but there is still a large room for sector growth resulting from efficiency gains.
Agricultural output increased 12.1% y/y in nominal terms in 2013, above the 2.5% nominal GDP growth. Although agro production has been volatile in recent years, we believe the state’s recent development programs and financing support are driving the strong growth. The sector posted one of the highest real growth rates of 9.8% in 2013 and contributed 1.0% to real GDP growth.
FDI in the agro sector continues to show promising inflows, with the 2013 number doubling that of 2012. The government has earmarked GEL 264mn (US$ 150mn) in funding, around 2.9% of budget expenditures, for the Ministry of Agriculture in 2014. The majority of this funding (around 82%) will be distributed to agricultural development program including: popularization of Georgian agricultural goods, supporting development of agricultural cooperatives, subsidizing interest costs on concessional loans, funding small farmers and developing irrigation systems. The government plans to increase the irrigation area 8x to 200,000ha in the next few years from the current 25,000ha. Georgia’s Agriculture Development Fund and Agricultural Projects Management Agency (APMA) are also providing funding support.
