Georgia's Growth Could Double by 2012: PM

Economic growth in Georgia is on track to reach 4.5 percent next year and could be double that by 2012-2013 as tourism, the banking sector and exports advance and foreign direct investment grows, the country’s Prime Minister told CNBC in an exclusive interview on Thursday.

“We had a difficult 2009, but we are on the way to recovery,“ Nikoloz Gilauri said, adding that Georgia had become a regional investment hub.

Private investors are seeking to expand from Georgia into the Caucasus, central Asia, Ukraine, Turkey but foreign direct investment decreased over the past two years because of the worldwide financial crisis.

The falls were being offset however by investment coming in through international institutions, Gilauri said, adding that this helped keep the country’s currency stable.

“Foreign direct investment decreased because of the worldwide financial crisis, but there is a serious increase in the inflows,” he said.

International financial institutions such as the World Bank, the European Bank for Reconstruction and Development and the Asian Development Bank, which are investing in projects such as hydro power plants and highways, were important drivers of this increase.

“These inflows offset the lack of FDI,” he said.

Relations between Georgia and neighboring Russia reached a low in 2008, when the two countries fought a five-day war over the Georgian region of South Ossetia.

But Georgia is now politically stable, and a recent deal with Bulgaria, which plans to buy natural gas from Azerbaijan and transport it across Georgia to the Black Sea, is testimony to that, Gilauri said.

Georgia also no longer relies on Russia for its energy.

“There is gas flowing from north to south, crossing Georgia from east to west…1.5 percent of the world’s total oil consumption crosses Georgia and we are electricity exporters to all neighboring countries, including Russia,” he said.