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Georgia

Economic Impact and Responses

June, 16, 2009Kiev, Ukraine

E&E Competitiveness Conference

Economic Growth

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GDP

Nominal GDP (US$bn) Real GDP growth, y-o-y (%)

Source: Department of Statistics of Georgia

Nominal 2008 GDP is US$12,797 mln Source: Department of Statistics of Georgia, Ministry of Finance of Georgia

Georgian Economy Overview

Source: International Monetary Fund

Georgian Economy Overview3

Investment Inflows

Source: National Bank of Georgia, International Monetary Fund

Source: Department of Statistics of Georgia

Net FDI

May 2009www.georgia.gov.ge

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Banking Sector Expansion

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Dhabi Group

Georgian Economy Overview May 2009www.georgia.gov.ge

Exchange Rate

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Exchange rate evolution

Source: National Bank of Georgia

Georgian Economy Overview May 2009

Georgian Economy Overview 6

Monetary PerformanceNBG’s Gross FX Reserves

Source: National Bank of Georgia Source: National Bank of Georgia

• As of 1 May 2009, Georgia has already entered into agreements for or received 38.2% (US$1,731.2 million, 13.4% of 2009 forecast GDP) of the total donors pledge to private and public sectors

• Additional projects have already been indentified and agreements have been reached on the amount of US$1,879.4 million (41.4% of total pledge, 14.6% of 2009 forecast GDP) to be formally committed in 2009

• Government of Georgia has been working and negotiating the terms and conditions on the remaining amount of US$924.4 million, 20.4% of total pledged amount

Donor US$ million

World Bank 530

EBRD 927

Asian Development Bank 300

IFC 350

European Investment Bank 330

USA 1,000

EC 638

EU members 174

Japan 200

Other states 88

Total 4,535

The Donors’ Pledges of US$4.5 billionAid by donors Aid by sectors

Georgian Economy Overview 7

Sector US$ million

IDPs support; e.g. IDPs housing 350

Transport infrastructure 682

Energy infrastructure 381

Urban and municipal infrastructure 210

Finance and banking 1,105

Non- sectoral support 586

Unallocated 1,221

Total 4,535Source: World Bank, European Commission Source: World Bank, European Commission

May 2009www.georgia.gov.ge

Current Account Deficit

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Current account deficit

Exports and imports**

CAGR (‘04-‘09F): 16% CAGR (‘04-‘09F): 10%

Note: Updated as of 10 April 2009*Donor inflows include both public and private sectors. Donor inflows in 2009 is adjusted according to the banking sector foreign debt outflowsSource: National Bank of Georgia , Minister of Finance of Georgia

**Export & import of goods and services Source: National Bank of Georgia

Georgian Economy Overview May 2009www.georgia.gov.ge

Fiscal Revenue

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Tax revenue performance(GEL mln)

Source: National Bank of Georgia

Georgian Economy Overview May 2009

Recent Reforms - Taxation

Georgian Economy Overview 10

‘04A ‘05A ‘06A ‘07A ‘08F ‘09F ‘10F ‘11F ‘12F ‘13F

Number of Taxes 21 7 7 7 6 6 6 6 6 6

VAT 20% 20% 18% 18% 18% 18% 18% 18% 18% 18%

Income Tax 12-20%

12% flat

12% flat

12% flat

Social Tax + Income Tax 32% 25%

Social Tax + Income Tax

20% 20% 18% 15% 15%

Social Tax 33% 20% 20% 20% - - - - - -

Corporate Profit Tax 20% 20% 20% 20% 15% 15% 15% 15% 15% 15%

Dividend income tax 10% 10% 10% 10% 10% 5% 5% 3% 0% 0%

Out of 21 taxes under the former tax code, only 6 exist today

Tax rates reduction timetable has been further accelerated in key tax rates in 2008

This will provide a significant stimulus for the economy in 2009 and beyond

Georgia, over the last five years, has evolved into one of the most attractive low-tax jurisdictions in Europe

Banking Sector

Georgian Economy Overview 11

NPL to total loans

Source: National Bank of Georgia, FSA

Foreign debt outflow

May 2009www.georgia.gov.ge

US$468.5 mln of US$548.5 mln banking sector debt, due in Q1 and Q2 0f ‘09, has already been repaid

Source: National Bank of Georgia, FSA

Georgian Economy Overview 12

Needs• Short term assistance to most vulnerable • Increased Competitiveness (gov & bus)• Reducing/rationalizing perceptions of risk

Activities• Trade and Investment – Access to information• Business Development – Competitiveness,

Human Capital• Continued Economic Reform

Georgia – USAID EG Activities