1. Standard & Poor’s: B/Stable
FitchRatings: B+/Negative
g g
The Georgian Economy
g y
Taking care of Business
Lado Gurgenidze
Prime Mi i t
P i Minister
October 2008

2. Conflict timeline
Minimal
Minor interruptions, Withdrawal Online Lending
Banking Business (almost)
restrictio Bank holiday lending & restrictions banking restrictions Business as usual
Sector as usual
ns online banking abolished resumed abolished
suspended
No interruptions in
Georgia still The pipelines
Energy Business Precautionary stoppage of BTC, electricity or gas Business (almost) Business as usual
exporting the resume
Sector as usual Shah-Deniz pipelines supply throughout as usual
electricity operations
August
All flights
Flight Significant All major ports are
Partial resumed
Transport & Business interruptions/ interruptions operating/Georgia Business (almost) Business as usual
blockade of other than
L gi ti
Logistics as usual
l G gi R il in il
Georgian Railway i railway n R il
Railway resumed d as usual
l
Poti to/from
kept functioning traffic normal operations
Russia
European Council;
Partial pullout of
Russia recognises Sarkozy – brokered
Russian Partial p
pull Russian troops.
p
South Ossetia & agreement on
Conflict forces Fighting Sarkozy six-point Illegal buffer back by Donors pledge
Abkhazia, Russian troops
timeline invade stops plan signed zone created Russian US$4.5 bn of
condemned by the withdrawal, EU
Georgia troops economic
free world observers and
recovery aid
Geneva talks
7–8 12 15 19 22 29
September October
August August August August August August
The Georgian Economy: Taking care of business October 2008 1

3. Resilience of the Georgian economy
NBG reserves TICEX volume and GEL/US$ exchange rate
TICEX trading volume (LHS)
FX reserves IMF stand-by arrangement
1,600 NBG's net purchases of GEL (LHS)
GEL/US$ exchange rate (RHS)
1,400 300 1.35
1,451
1,200 200 1.408 218.8 1.405
1,026 251
1.413 1.40
1,252
1.413
1,000
1,123
100
1,090
1,086
US$ mln
113.6 106.5 108.7
1.45
US mln
800 47.3
0
600 0.0 -97.5 1.50
-100
400 -187.3
187 3
-200 1.55
200
0 -300 1.60
1-Aug 14-Aug 31-Aug 15-Sep 29-Sep 16-Oct Jul-08 Aug-08 Sep-08 Oct-08
Oct-08-to date
Source: National Bank of Georgia
Source: National Bank of Georgia
Fiscal revenue collection Sovereign eurobonds’ price and yield performance
Tax Revenues Customs Revenues Price (LHS) Yield (RHS)
500 100 15%
438.3
403.3 95 14%
400
3
167.3
13%
161.9
303.6 90
GEl mln
300 12%
116.2
US$
85
200 146.6 11%
80
271.0
8.9
2.0
10%
4
187.4
87.7 58
242
100
75 9%
0 70 8%
Jul-08 Aug-08 Sep-08 Oct-08
Oct-08-to date 31-Jul 15-Aug 29-Aug 15-Sep 30-Sep 16-Oct
Source: Ministry of Finance Source: Bloomberg, National Bank of Georgia
The Georgian Economy: Taking care of business October 2008 2

4. Consumer, Lender & Investor confidence largely intact/recovering
Aggressive IR communications campaign by the Government
Strong statements of confidence & support by the IMF, World Bank, EBRD, ADB,
US Treasury, G7 Finance Ministers, EU
Sovereign Eurobonds bid-ask quotes stable at 0.85 – 0.89 since 11 august 2008
Galt & Taggart Index declined by 38% since 1 August 2008
Real estate – circa 800 daily real estate-related transactions on average in
estate related
August, compared to 1,100 daily real estate-related transactions on average in
August 2007 and 1,900 daily real estate-related transactions on average in
January – July 2008
Cars – circa 390 average daily car registrations on average in August, compared
to 620 daily car registrations on average in August 2007 and 800 daily car
registrations on average in January – July 2008
Aggregate volume of privatisation transactions in August-October 2008
amounted to US$61.1 million
Several inquires about large asset purchases by prominent investors
The one fundamental factor has not changed - the same group of people
with strong libertarian leanings pursuing the same laissez-faire economic
policies
The Georgian Economy: Taking care of business October 2008 3

5. Early statements of support and confidence in the Georgian economy
EBRD urges rapid resolution of Georgia IMF Statement on the Situation in Georgia
World Bank Statement on Georgia
conflict (11 Aug ‘08) (11 Aug ‘08)
(11 Aug ‘08)
During recent years, Georgia has made enormous Georgia has strong economic fundamentals, the In particular, Georgia has followed sound macroeconomic and financial sector
progress in introducing and implementing key result of a committed reform program and prudent policies, notably in the context of the IMF-supported program under the
reforms... fiscal management by the government... Poverty Reduction and Growth Facility…
The EBRD considers the Georgian banking sector as The Bank will respond flexibly and speedily with The IMF maintains a close policy dialogue with the Georgian authorities and
a whole as efficient... policy advice and financing
financing... we expect their strong economic policies to be continued…
Statement by Deputy Secretary Robert M. Kimmitt on Support for
ADB Statement on Georgia (13 Aug ‘08)
Georgia’s Economy (11 Aug ‘08)
Given its sound macroeconomic and fiscal policies and excellent progress in transition Georgia, the ADB’s newest member, has taken major strides in economic reform in recent years,
to a market economy, Georgia is well placed to weather the current crisis. Georgia's reflected in the substantial economic gains the country has made since 2004…
economy has been one of the strongest in the region owing to its proven record of It has demonstrated resilience in the face of external shocks, with the adoption of a robust
, p
reforms, and this reform effort deserves continued international support. macroeconomic policy framework, reinforced with a coherent set of structural reforms…
Statement by G-7 Finance Ministers on Georgia (20 Aug ‘08)
quot;We, the G-7, stand ready to support Georgia in order to promote the continued health of the Georgian economy, maintain confidence in Georgia's financial system and support economic
reconstruction.
quot;In this regard we welcome the commitment by Georgia and the International Monetary Fund to work together to reinforce the soundness of Georgia's economic reform program. We also call on the
Georgian authorities, other countries, the World Bank, European Bank for Reconstruction and Development, Asian Development Bank, European Investment Bank, and European Commission to
promptly identify and support reconstruction needs and th restoration of services th t will b ild a b
tl id tif d t t ti d d the t ti f i that ill build base f f t
for future economic g
i growth.
th
quot;Georgia has solid economic fundamentals as a result of economic reforms and sound policies, and we are committed to helping Georgia continue on this path.“
IMF Mission Reaches Agreement in Principle on a $750 million Stand-By Arrangement with Georgia (3 Sep ‘08)
Following a request by the Georgian authorities for IMF financial support, an IMF mission visited Tbilisi August 23-September 3 and has reached an agreement in principle on a $750 million financial
package in the form of an 18-month Stand-By Arrangement. The proposed arrangement requires the approval of the IMF Executive Board, which is expected to consider Georgia's request in mid-
September.
S t b
The IMF Stand-By Arrangement is intended to support the economic policies put in place by the Georgian authorities to overcome the adverse economic and financial consequences of the recent
conflict. Apart from the loss of human life and destruction of property and infrastructure, the conflict has led to a slowdown in capital inflows and a loss of international reserves.
Georgia's strong record of reform and sound macroeconomic policies have strengthened the resilience of the economy and bode well for a solid recovery from this shock. The main objectives of the
Stand-by Arrangement are to cover part of the expected temporary external financing gap, and to restore swiftly the confidence of markets and investors by supporting policies that will ensure
continued macroeconomic stability and promote the recovery of private sector investment.
White House - Condoleezza Rice statement (3 Sep ‘08)
( p )
As part of America's contribution, today, I am announcing $1 billion in additional economic assistance to meet Georgia's humanitarian needs and to support its economic recovery. More than half of
these funds will be made available in the near term and will support reconstruction efforts in Georgia, assist the Government of Georgia in leading the nation's recovery, and meet ongoing
humanitarian needs, including the resettlement of displaced families. The balance of the funds, together with assistance from the European Union and other partners, will help the Government of
Georgia rebuild critical infrastructure and help local communities and businesses get back on their feet. My Administration looks forward to working with Congress on elements of this package.
Georgia has a strong economic foundation and leaders with an impressive record of reform. Our additional economic assistance will help the people of Georgia recover from the assault on their
country, and continue to build a prosperous and competitive economy.
4
The Georgian Economy: Taking care of business October 2008

6. Path to economic recovery
Robust regulatory response included
• Temporary waiver of mandatory reserve requirements Joint World Bank - European Commission Press Release
International Donors Pledge - US$4.5 billion (EUR3.4 billion) in Post-Conflict Support to
• The reduction of the main policy rate from 12% to 10% Georgia
• Establishment of two liquidity/refinancing facilities Brussels, 22 October 2008. At a joint European Commission / World Bank Conference held
by the NBG, with the aggregate capacity of GEL 300 today in Brussels, 38 countries and 15 international organizations pledged to provide
mln (US$204 mln) approximately US$4.5 billion (EUR3.4 billion) to Georgia. Without counting funding going to
the financial sector, pledges amounted to some US$3.7 billion, or EUR2.8 billion, to meet the
• Reduction of the liquidity ratio from 30% to 20% urgent post-conflict and priority investment needs of Georgia over the coming three years
(2008, 2009, and 2010). This level is even higher than the basic needs outlined in the Joint
• Reduction of the FX loan risk weighting from 100% to Needs Assessment (JNA) presented to the conference.
75%
The meeting was opened by the President of the European Commission (EC), Jose Manuel
Barroso, the current European Union (EU) Presidency representative, French Foreign Minister
IMF US$750 million stand by arrangement, Bernard Kouchner, and the prospective EU Presidency representative, Czech Foreign Minister
subject to board approval Karel Schwarzenberg. The meeting continued under the co-chairmenship of Shigeo Katsu,
World Bank Vice President, and B. Ferrero-Waldner, EC Commissioner.
US$1 billion economic recovery assistance
Georgia was commended for launching a swift and effective post-conflict recovery program.
package announced by the US administration Repair of damaged infrastructure and social assistance and housing for internally displaced
people began quickly.
EU economic recovery assistance package to be
announced in early October The amount pledged is based on a JNA coordinated by the World Bank with the participation
of the European Commission, the United Nations, the Asian Development Bank, the
Closer trade, investment ties with the US sought
, g International Finance Corporation, the European Investment Bank, and the European Bank for
Reconstruction and Development.
Engagement with EU on free trade, visa The total contributions pledged today are in addition to ongoing programs. These
facilitation contributions are also in addition to the recent approval of a new US$750 million standby
program by the International Monetary Fund (IMF). IMF funds are provided for international
Deeper engagement with the IFIs reserves and cannot be used for budget or investment purposes. However, donors welcomed
the IMF program as a solid foundation for donor contributions to be used effectively.
Donors h
D have pledged US$4 5 b of economic
l d d US$4.5 bn f i
The Government of Georgia welcomed the donor pledges as vital for Georgia's speedy
recovery aid over a three-year period recovery. The Prime Minister of Georgia, Lado Gurgenidze, stated that quot;On behalf of the
Georgian people we thank the international community for their solidarity. With their help,
I know Georgia's recovery will be swift.quot;
The Georgian Economy: Taking care of business October 2008 5

7. Post-conflict macroeconomic outlook
2008
Impact of the Conflict
Pre-conflict Post-conflict
Growth (%) 9.0 3.5
Inflation (%) 10.0 8.0
Fiscal balance (% of GDP) -4.0 -6.0
FDI (US$ bn) 2.1 1.2
Current account deficit (% of GDP) -16.6 -20.8
Gross Domestic Product External sector analysis
Current account balance (as % of GDP)
Nominal GDP (LHS) Real GDP growth rate (RHS) Foreign direct investments (as % of GDP)
16 14% Export of goods and services (as % of GDP)
12.4% Import of goods and services (as % of GDP)
14 70%
12% 56.8% 57.8%
14.0 60% 53.5% 52.7%
12 13.3
9.4% 10% 50%
US$ bn
10 40% 31.7%
33.1% 29.2%
10.2 8% 27.6%
30%
8 20%
20%
7.8 6% 14% 10%
6 10% 8%
3.5% 4.0%
4% 0%
4
-10%
2 2%
-20% -15%
-19% 21%
-21% -19%
19%
-30%
0 0%
2006A 2007A 2008F 2009F
2006A 2007A 2008F 2009F
Source: International Monetary Fund Source: International Monetary Fund
The Georgian Economy: Taking care of business October 2008 6

8. Country overview
Population: 4.6 mln (Department of Statistics)
Capital: Tbilisi
Government type: Republic
Area: 69,700 sq km (26,911 sq miles)
State language: Georgian
Major religion: Christianity
Life expectancy: 69 years (men), 77 years (women)
(UN)
Median age: 38 years
Monetary unit: Georgian Lari (GEL)
y g ( )
GEL/US$: 1.4140, GEL/EUR: 1.8200
2007 GDP: GEL17.0 bn (US$10.2 bn)
2007 GDP per capita: GEL3,868 (US$2,315)
2007 Real GDP Growth: 12.4%, versus 9.4% in 2006
and 9.6% in 2005
CPI Change: 2007 period average was 9.2% versus
9.2% in 2006 and 8.2% in 2005
Net FDI inflows: US$937.6 mln in 1H 2008,
US$2,014.8 mln in 2007 versus US$1,076 mln in 2006
and US$542 mln in 2005
Source: CIA Factbook, BBC
The Georgian Economy: Taking care of business October 2008 7

9. Sustained liberal reforms of 2004-2008 have laid a sound
foundation for long term growth
Political stability and continuity Prudent fiscal policy
• Fresh five-year mandate for the • Low, flat and decreasing taxes
confirmation of the reforms after • Modern public finance framework – MTEF,
President Saakashvili’s first-round re- Single Treasury Account , etc
election (53.5%) and parliamentary • Budget expenditure cap of 25% of GDP
elections in 2008 mandatory from 2011
Effective monetary policy
Vibrant & rapidly growing financial sector • Move to explicit inflation targeting in 2009
• Banking sector assets/GDP at 44% at YE2007, up • CPI target limited to single digits
from 16% at YE2003 • Parliamentary confidence vote on central bank governor
• Assets ‘03 – ’07 CAGR of 52% in case of four consecutive quarters of +/- 2% deviation from
/
• Loans ‘03 – ’07 CAGR of 57% the target
• Deposits ‘03 – ’07 CAGR of 48% • Period average CPI of 11.1% - 10.2% since 2006
• No state-owned banks since 1996 • Cumulative increase of the main policy rate by 500bps to
• No restrictions on foreign ownership of the banks, 12% in November 2007 – July 2008, decrease to 11% in Aug.
7 of the top 10 banks foreign-controlled 2008 and to 10% in Sep. 2008
• NPLs at a manageable level of 2.6%, Robust Economic • YTD CPI of 5.8%
predominantly collateralized lending
• BIS CAR of circa 15 8%
15.8% Performance & • September ‘08 y-o-y period-end CPI of 10.6% - one of the
l t i the i
lowest in th region
• Loan/deposits ratio of 1.5x Sustained Growth • Broad money y-o-y growth reduced to 6.3% by Sep. 2008
• (Deposits + Equity)/Assets ratio of 0.66x • Full currency convertibility since 1997
• Borrowed funds 30% of total assets • Stable currency and managed float
• Further sector reforms
Positive external momentum
• Total public debt as % of GDP reduced Strong capital inflows
from 56% in 2003 to 23% in 2007 Expanding economic base • Net FDI 19.8% of GDP in 2007
External public debt as % of GDP reduced • Radical deregulation & liberalisation • Total private capital inflows 23% of GDP in
f
from 38% in 2003 t 15% i 2007
i to in since 2004 2007
• FX reserves increased from US$191 mln in • Entrepreneurial boom, with over • Breadth of institutional investor coverage
2003 to US$1,446 mln in July 2008 50,000 new business registered p.a. • Moderate banking and private sector
• Successful debut 5-year 7.5% RegS • Pronounced shrinkage of grey borrowing
Eurobond of US$500 mln issued in April 2008 economy & corruption since 2004 • Net remittances 7.4% of GDP in 2007
• Export diversification and growth
(‘03-‘07 CAGR of 26%)
The Georgian Economy: Taking care of business October 2008 8

10. Key Investment Highlights
Sustained liberal reforms in 2004-2008
• Modernisation of the state and civil service
• Successful supply-side fiscal experiment with low flat and decreasing taxes resulting in 356%
low,
increase in fiscal revenue since 2004
• Radical deregulation and liberalisation
Rapid economic growth (9.3% in Q1 2008, 12.4% in 2007, 9.4% in 2006), driven by
• The Schumpeterian burst of entrepreneurial activity
• Rapid credit expansion
• Growth in domestic consumption led by the rapidly expanding middle class
• Rehabilitation of infrastructure
• Export growth (‘03-‘07 CAGR of 26%) and diversification
• Steadily increasing remittances (US$775 mln in 2007 vs. US$87 mln in 2003)
• Off-the-charts high net FDI inflows (19.8% of GDP in 2007, 13.9% of GDP in 2006, cumulative in
1996-2007 54% of ‘07 GDP)
High resilience to external shocks (e.g. energy & commodity prices, Russian embargo, global
financial crisis)
Fresh five-year mandate to continue implementing reform-oriented policies
Deeper engagement & economic integration prospects with the EU and US
The Georgian Economy: Taking care of business October 2008 9

11. Radical reforms created a favourable market environment…
Euromoney - country risk rating, Sep.
Ease of Doing Business, 2009 Economic Freedom Index, 2007
2008
USA 3 USA 5 Latvia 59
UK 6 UK 10 Bulgaria 62
Norway 10 Estonia 12
GEORGIA 15 (U f
(Up from 112 i 2005)
in Kazakhstan 69
GEORGIA 32 (U f
(Up from 93 in 2005)
i
Azerbaijan 71
Estonia 22 Latvia 38
Azerbaijan 33 Hungary 43
Jordan 75
Armenia 44 Turkey 76
Bulgaria 46 France 48
Bulgaria 59 Macedonia 80
Romania 45 Ukraine 81
Turkey 59 Itanly 64
Kazakhstan Romania 68 El Salvador 83
70
Belarus
B l 85 Turkey 74 Armenia 85
Montenegro 90 Kazakhstan 76 Georgia 88 (Up from 144 in
Serbia 94 Azerbaijan 107 Nigeria 90 March 2005)
Russia 120 Ukraine 133 Uruguay 94
Ukraine 145 Russia 134 Belarus 95
Source: World Bank, 2008 (Rank out of 181 countries) Source: The Heritage Foundation Source: Euromoney
Inward FDI Performance Index
Corruption Perception Index, 2008 Worldwide Government Indicator, 2007
Ranking, 2007
Turkey 58 Georgia Former Soviet Union Income level peers Hong Kong, China 1
(Percentile ranks) Bulgaria 2
GEORGIA 67 (Up from 130 in 2005) 45 Iceland 3
Voice and Accountability 21
FYR Macedonia 72 38 Malta 4
Serbia Political Stability/No
y 22 Bahamas 5
85 27 Jordan
J d 6
Montenegro 85 Violence 39 Singapore 7
Albania 85 Government Effectiveness 51 Estonia 8 (Up from 16 in 2005)
26
38 Georgia 9
Armenia 109 Lebanon 10
Regulatory Quality 44
Moldova 109 28 Guyana 11
34 Bahrain 12
Ukraine 134 33 Belgium 13
kh t
Kazakhstan
K 145 Rule of Law 20 Gambia
G bi 14
38
Panama 15
Russia 147 45 Mongolia 16
Corruption 22
Belarus 151 38 Tajikistan 17
Azerbaijan 158 Percentile rank indicates the percentage of countries worldwide Cyprus 18
that rate below the selected country. Higher values indicate Moldova 19
Egypt 20
better governance ratings
Source: Transparency International; 180 countries ranked Source: UNCTAD
Source: World Bank
The Georgian Economy: Taking care of business October 2008 10

12. …and provided the platform for high economic growth…
GDP
Nominal GDP (US$bn) Real GDP growth, y-o-y (%)
12 12.4% 14%
11.1%
11 1%
10 12%
9.6% 9.4%
8.5% 10%
8
5.9% 8%
6
10.2 6%
4 7.8
6.4
64 6.1 4%
2 5.1
4.0 2%
0 0%
2003 2004 2005 2006 2007 1H 2008
Source: Department of Statistics of Georgia
Components of nominal GDP, 2007 Comments
Agriculture,
Manufacturing,
Boosted by aggressive economic reforms and substantial FDI
9.4%
8.4% inflows, Georgia’s economy continues to show strong growth
Other, 29.2% Rapid economic growth has been driven by
Construction,
C t ti
6.7% • A burst of entrepreneurial activity
Education &
Healthcare, • Growth in domestic consumption led by a new middle class
7.4%
• Rehabilitation of infrastructure, and
Trade, 13.1%
Public • Exports
Administration,
12.8% Georgia s
Georgia’s economic performance in 2006 and 2007 is
Financial
Transport & particularly impressive, taking into consideration the
Communications,
Intermediation,
10.7%
consecutive external shocks (Russian embargo, rising
2.2%
commodity prices & subprime meltdown) and tight monetary
Nominal GDP = US$10,175 mln policy
Source: Department of Statistics of Georgia
The Georgian Economy: Taking care of business October 2008 11

13. …that is improving living standards and providing economic
diversification
Nominal GDP per capita GDP per capita (PPP)
Nominal GDP per capita (LHS) Consumer indebtedness per capita (RHS) US$
2,895 5,000
5 000
3,000
3 000 180
4,176
2,500 2,315 150 4,000 3,642
3,288
2,000 1,764 120 2,911
3,000 2,656
US$
US$
1,484
1,500 1,188 90
919 2,000
1,000
1 000 60
1,000
500 30
0 0 0
2003 2004 2005 2006 2007 2008F 2003 2004 2005 2006 2007E
Source: Department of Statistics of Georgia , National Bank of Georgia Source: International Monetary Fund
Broad-based economic growth GDP per capita (PPP)
Agriculture Industry (US$)
Energy Construction 2001 2003
5,000 2003 2001 2005 2007
Transport & Communications Financial Intermediation
Healthcare 4,000
60%
3,000
2,000 4,396 4,330 4,264 4,237 4,197 4,176
40%
1,000
20% 0
Baa2/BBB+/BBB+
BBB
BBB
B1/BB-/BB-
BBB
ia
ne
ia
ia
ia
an
NA
Baa3/BBB+/B
Baa3/BBB-/B
Russi
Romani
Bulgari
Georgi
Ukrain
B+/B/N
Kazakhsta
Baa2/BBB-/B
0%
2003 2004 2005 2006 2007 1H 2008
-20%
Source: Department of Statistics of Georgia Source: International Monetary Fund
The Georgian Economy: Taking care of business October 2008 12

14. Net FDI as % of GDP, ‘07
Georgia
Ukraine 6.3%
19.8%
Strong investment inflows from strategic and...
Kazakhstan 5.8%
Poland 4.4% Net FDI inflows FDI breakdown by origin
(US$ mln) Agriculture Industry 2004-1H 2008
Russia 4.1%
BP/BTC/SCP Banking Country US$ mln %
Hungary 2.8% Other Sectors Net FDI as % of GDP UK 626.1 12.3%
Source: National Bank of 2,400 19.8% 21% Netherlands 492.5 9.7%
Georgia, International Monetary
Fund
2,100 2,015 18% USA 439.0 8.6%
Cumulative Net FDI, 2004-1H2008 (LHS) 1,800 13.9% Turkey 433.0 8.5%
15%
Cumulative Net FDI as % of GDP(RHS) UAE 334.3 6.6%
1,500
6 50% 1,076 12% British Virgin Islands 281.0 5.5%
1,200 9.4%
39% 8.3% 8.5% Kazakhstan 275.7 5.4%
5 40%
40% 9%
900 Cyprus
C 267 0
267.0 5.2%
5 2%
4
30% 600 483 542 6% Azerbaijan 256.4 5.0%
27%
US$ bn
3 331 3% China 244.1 4.8%
5.1 20%
300
16% Subtotal 3,649.1 71.6%
2 4.1 - 0%
9% Other 1,450.3 28.4%
1 2.1 10%
0.5 1.0 2003 2004 2005 2006 2007 Total 5,099.3 100.0%
0 0% Source: Department of Statistics of Georgia Source: Department of Statistics of Georgia
2004 2005 2006 2007 1H
2008
Privatisation Selected strategic investors
Source: Department of Statistics
of Georgia (US$ mln)
Cumulative Net FDI per capita 500
1,400
400
1,200 400
00
1,195
1,000 297
300 266
800 228
US$
757
600 200
400 498
400 100 38
200
0 0
2003 2004 2005 2006 2004 2005 2006 2007 2008YTD
Source: Department of Statistics
of Georgia
Source: Ministry of Economic Development of Georgia
The Georgian Economy: Taking care of business October 2008 13

15. …portfolio investors…
• Up to 300 institutional investors invested in Georgian debt and equities in 2004-2008
EQUITY DEBT
LOCAL
EUROCLEAR
etc
ONLY
The Georgian Economy: Taking care of business October 2008 14

16. …and high and growing remittances...
Net remittances Cumulative net remittances (2004 – 9m 2008)
Country September ‘08 August '08 Growth m-o-m Growth y-o-y Jan-Sep '08 Jan-Sep '07 Growth y-o-y Country Cumulative net remittances
Russia 51,749 42,922 20.6% -0.5% 407,276 344,004 18.4% Russia 1,437,557.2
Ukraine 5,397 3,852 40.1% 3859.6% 34,704 3,770 820.5% USA 282,116.8
Greece 5,281 3,679 43.5% 196.9% 29,651 13,524 119.2% Spain 57,830.0
USA 5,129 5,149 -0.4% -55.3% 44,608 93,618 -52.4% Greece 92,292.0
,
Turkey 1,573 1,902 -17.3% 38.0% 16,955 15,528 9.2% Turkey 51,160.5
Kazakhstan 929 877 5.9% -9.3% 6,438 7,005 -8.1% Kazakhstan 21,388.0
Spain 887 1,325 -33.1% -58.2% 11,686 10,071 16.0% UK 25,731.1
Israel 728 652 11.7% 28.6% 3,672 2,881 27.5% Israel 23,903.0
Germany 557 530 5.1% 137.1% 2,547 1,685 51.2% Ukraine 51,306.1
Canada 390 343 13.7% 46.5% 5,561 5,370 3.6% Germany 15,182.1
Azerbaijan 353 226 56.2%
56 2% 168 4%
-168.4% 2 627
2,627 972 170.3%
170 3% Canada 9,561.0
9 561 0
UK 349 404 -13.6% -58.2% 7,600 4,620 64.5% France 11,631.0
France 286 281 1.8% 11.0% 4,491 -2,015 -322.9% Belgium 3,390.9
Netherlands 109 109 0.0% 34.1% 644 261.3 146.5% Netherlands 3,107.5
Belgium 90 160 -43.8% 223.7% 1,271 1,101 15.4% Poland 1,004.6
UAE 89 77 15.6% 100.5% 831 573.4 44.9% UAE 1,631.6
Poland 72 55 30.9% 393.2% 306 220.6 38.7% Turkmenistan 21.7
Turkmenistan -2 1 -300.0% -65.5% -42 -48.8 -13.9% Azerbaijan -231.1
Other Countries 5,297 5,551 -4.6% 83.9% 65,324 20,488 218.8% Other Countries 261,566.5
Total 79,263 68,095 16.4% 6.6% 646,150 523,629 23.4% Total 2,350,150.7
Source: Department of statistics of Georgia
Net remittances Cumulative (2004-9m2008) net remittances (% of total)
Net Remittances (LHS) Net remittances as % of GDP (RHS)
800 8% Ukraine, 2.2%
7.4%
Israel, 1.0% Other,
600 5.4% 6% 13.1%
UK, 1.1%
4.9% Russia, 61.2%
4.1% Kazakhstan,
US$ mln
755.4
400 4% 0.9%
646.2
$
Turkey, 2.2%
420.5
200 2%
315.4
Greece, 3.9%
212.7
Spain, 2.5%
0 0%
USA, 12.0%
2004 2005 2006 2007 9m 2008
Source: Department of statistics of Georgia
The Georgian Economy: Taking care of business October 2008 15

17. …have comfortably financed most of the current account deficit
Current account deficit
(US$mln) CAD Total private capital inflows (TPCI) CAD as % of GDP CAD + TPCI, as % of GDP
2,500 2,250 30%
2 000
2,000 25%
1,701
20%
1,500 1,076 15%
1,000 623
483 10%
500 369 3.3% 5%
2.7% 0.3%
0 0%
500
-500 -376 -0.2% -344 -701 -1 2%
1.2% 1.0%
-1.0% 5%
-5%
-9.4% -6.7% -1,154 -1,917 -10%
-1,000 -10.9% -1,685
-15%
-1,500 -14.9%
-20%
-2,000 -25%
-18.9%
-2,500 -27.4% -30%
2003 2004 2005 2006 2007 1H 2008
Source: National Bank of Georgia
Exports and imports*
(US$mln)
7,000 Imports Exports
CAGR(‘03-‘07): 33% CAGR(‘03-‘07): 26% 5,895
6,000
5,000 4,413
3,748
4,000 3,319 3,240
3,000 2,493 2,568
2,183 1,931
1,866 1,644
1 644
2,000 1,287
1,000
0
2003 2004 2005 2006 2007 1H 2008
Source: National Bank of Georgia
* Export & import of goods and services
The Georgian Economy: Taking care of business October 2008 16

18. Liberal Trade Regime, Diversified Trade Structure
Regime
Export structure* by country, 1H 2008 Import structure* by country, 1H 2008
WTO member since
2000 Kazakhstan,
Armenia, 1.1%
, Others, 9.3%
1 3%
1.3% Other, 5.2% Kazakhstan,
China, 0.8%
1.4%
Simplified customs Russia, 2.1% EU Countries,
regime since August Turkmenistan, 29.7%
United Arab
2006, new customs code Emirates, 0.9% EU Countries,
2.8%
became effective in 28.7% China, 5.2%
2007 Canada, 7.9%
USA, 5.0%
USA 5 0%
Ukraine, 7.6%
No quantitative United Arab
Armenia, 7.4%
restrictions on trade Emirates, 5.2% Turkey, 13.7%
Zero tariff on the Turkey, 17.0%
Russia, 6.9%
majority of goods Azerbaijan,
Ukraine, 10.1% Azerbaijan,
14.2% 9.3%
USA, 8.0%
USA 8 0%
One of the two Source: Department of Statistics of Georgia Source: Department of Statistics of Georgia
beneficiaries of the EU
GSP+ Scheme in the CIS Export structure* by product, 1H 2008 Import structure* by product, 1H 2008
since 2006, granting
Equipment & Oil & Gas, Paper, 1.5%
local companies the Pharmaceuticals, Sugar, 1.0%
Rail Cars, 3.4% 2.8%
1.3% Vessels & Plastic, 2.7%
right to export 7,200
g p , Aircraft 0.4%
Aircraft, 0 4%
Cement, 5.7% Ferrous Metal
categories of goods Others, 41.5%
Gems & Sugar, 0.8% Products, 2.8%
duty-free Ferrous
Precious
Stones, 6.4% Metals, 3.7%
Share of EU in
Beverages, Others, 18.5% Pharmaceuticals,
exports up to 29% from Spirits &
3.2%
17% in 2003 Vinegar, 7.7%
Cereals, 3.2%
Vehicles, 7.6%
In November 2007
Vehicles,
Georgia entered into a Fertilizers, Ferrous 14.4% Mechanical
free trade agreement 7.5% Metals, 28.5% Equipment &
Coppers & Oil & Gas,
Gold, 9.5% Electrical
with Turkey 17.6%
Machinery,
Source: Department of Statistics of Georgia 20.1%
* Export & import of goods only p f f g
Source: Department of Statistics of Georgia
The Georgian Economy: Taking care of business October 2008 17

19. Entrepreneurial activity has flourished…
New business registrations per year Number of registered businesses
(Thousands) (Thousands)
60 500
51
47 399
50 43 400 352
40 301
29 30 300 257
30 227
198
200
20
10 100
0 0
2004 2005 2006 2007 YTD 2008 2003 2004 2005 2006 2007 YTD 2008
Source: Ministry of Finance Source: Ministry of Finance
Number of registered businesses per 100 adults Starting a business, 2009
Time (days) Procedures (number)
New Zealand 1
1
GEORGIA 33
Hungary 45
USA 66
Turkey 66
Estonia 5 7
Netherlands 6 10
Romania 6 10
Italy 6 10
UK 6 13
Latvia 5 16
Azerbaijan 6 16
Germany 9 18
Armenia 9 18
Kazakhstan 8 21
Ukraine 10 27
Russia 8 29
Bulgaria 4 49
Source: World Bank - Doing Business 2008 Source: World Bank report - Doing Business 2008
The Georgian Economy: Taking care of business October 2008 18