The agricultural sector posted real growth of 3.2% y/y in 1H15, with output rising to GEL 1.2bn, making up 9.4% of Georgia’s 1H15 GDP. Lower world food prices led to an improved trade balance in primary agricultural commodities in 9M15, while processed products saw a decline on the back of lower wine exports to Russia. The largest share (54.9% of the total) of agricultural exports was directed to the EU. In line with the signing of the DCFTA, approximation procedures with EU legislation are being launched, supported by the government, donors and IFIs; successful implementation should stimulate agriculture FDI and exports. Significant progress has been made in expanding irrigation and drainage coverage. Land registration issues remain a major concern; a project is underway to develop a comprehensive national land register.
Agricultural output expanded 3.2% y/y in real terms in 1H15, constituting 9.4% of Georgia’s 1H15 GDP. Livestock farming remained the leading driver, accounting for half of total agricultural output. The second largest contributor was the growing of fruit, nut, beverage, and spice crops, which made up 18.3%, while cereals and other crops accounted for 12.6% of total agricultural GDP.
Processed food, beverage, and tobacco contracted 1.7% y/y in nominal terms, with output amounting to GEL 477.2mn in 1H15. The average annual growth rate over the preceding five years was almost 20%. The largest contributor to the decrease was alcoholic beverages (20.5% of the total), with output down 33.5% y/y in 1H15. The drop was due mainly to lower demand for alcoholic beverages from the CIS countries. There was also a 50% increase in excise taxes on alcohol in March 2015, which resulted in a rise in alcohol prices and dampened domestic demand. Mineral water and non-alcoholic beverages (28.3% of the total) posted 7.4% y/y growth in 1H15.
