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Tbilisi Real Estate Market Watch – July 2020

30 July, 2020

In 2Q20, real estate fundamentals were negatively affected by Covid-19 with double digit contraction in GDP in April-May, weakening GEL and inflationary pressures. Apartment sales contracted sharply in April and May, however with lockdown measures being lifted reduction slowed in June, highlighting first signs of recovery. Importantly, drop in sales was more pronounced in new apartment category as market was waiting for government’s mortgage interest rate subsidy program, which became effective from July 2020.

Please see the full note here, which brings together real estate sale and price analytics for 2Q20, Covid-19 impacts and other statistical information available in the real estate market.


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Georgia's education sector

28 July, 2020

Georgia's education sector revenues totaled GEL 2.0bn or 4.1% of GDP in 2019, with private sector generating GEL 0.5bn. The private education sector enjoys growing revenues and strong financial performance, recording a 20.4% net profit margin in 2018 – 3x higher than that of total business sector in Georgia. Even though, government expenditure on education has tripled over 2010-19 standing at 3.6% of GDP in 2019, the indicator is still low compared to Western European countries, where education expenditure accounts for over 5% of GDP. The government plans to increase spending on education to 6% of GDP from 2022 to enhance human capital and support economic development. We expect the education sector to grow at a high single-digit annual rate in the medium term, backed by increased state financing and strong demand for educational services.

General education is the largest sub-sector, accounting for 78% of total enrollment (excl. pre-school) and 46% of total industry revenue. General education in Georgia is still concentrated in public schools, but the private sector enjoys rising enrollments and tuition fees due to a higher perceived quality compared to public schools. We believe this trend will continue, backed by increased disposable incomes, urbanization and positive demographic trends in the medium term. M&A activity is heating up, enhancing operational performance. Quality of education is still a challenge; however, a planned increase in teacher salaries and other reforms in the sector will hopefully improve educational outcomes.

VET programs are not prestigious among Georgian youth, with only 15.6k registered students or 6% of the eligible age group as of 2019. Vocational education enrollments are concentrated in public institutions. Despite improvements, state expenditure on vocational education remains low, accounting for only 3.2% of total state spending on education in 2019. The low geographic coverage of institutions is another factor limiting accessibility. With planned reforms and an increase in public spending, enrollments in vocational education are expected to grow.

The higher education sector has seen a strong and improving financial performance. Our outlook on the sector is optimistic, sustained by (i) increasing household incomes (ii) rising intakes from older age groups and foreign students; and (iii) low penetration compared to peers. We believe large players in the private market will keep gaining share versus smaller players and continue growing above the market due to their superior operational practices and economies of scale. We expect consolidation in the sector as it is still highly fragmented. On the one hand, the sector can benefit from a rising number of international students and older age groups; on the other, the stable level of high school graduates and limited affordability may drag growth down. Tuition fees are a heavier burden on students in Georgia compared to peer countries, as they are mainly financed by households, while public financing remains low and students have low or no self-earned incomes.

Higher education in Georgia has low economic return. It barely improves employability and adds a low salary premium to degree holders compared to peer countries. The reasons for the poor payback are complex: 1) the higher education system continues to provide an excessive number of graduates to an economy with a high job concentration in low-skill, low-wage sectors; 2) school and higher education graduates make uninformed career decisions; and 3) general and higher educational institutions in Georgia provide inadequate technical, cognitive and social skills. As a result, the unemployment rate is high for Georgian youth, there is a significant mismatch between professions and occupations and self-employment is widespread.


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Tourism Challenges in the Second Half of 2020

19 June, 2020

Tourism Challenges in the Second Half of 2020


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Georgia's Energy Sector - Electricity Market Watch | April 2020

27 May, 2020

Electricity consumption was down by 7.1% y/y in April 2020, caused by lockdown and related decreased economic activity due to Covid-19 pandemic. Notably, Abkhazian region’s electricity consumption increased significantly by 18.4% y/y in Apr-20, while the consumption of the rest of Georgia was down by 12.9% y/y. Electricity consumption dynamic by group of consumers is as follows:  Energo-pro Georgia’s electricity consumption was down by 12.4% m/m and 29.3% y/y, electricity consumption of Telasi was down by 23.3% m/m and 23.0% y/y, electricity consumption of large commercial enterprises was almost unchanged. 

Demand on electricity was satisfied mostly by hydro generation (80.3% of total). 15.1% of demand was met by thermal generation and the rest was imported in Apr-20. Hydro generation was down by 1.7% y/y due to unfavourable hydrological conditions. The decrease of thermal generation (-6.5% y/y) and imports (-55.2%y/y) is explained by decreased demand on electricity. 82.0% of electricity imports came from Russia, mostly for satisfaction of Abkhazian region’s increased consumption, the rest was imported from Azerbaijan.

In 4M20, electricity consumption decreased by mere 0.8% y/y to 4.3TWh. During this period, electricity consumption in Abkhazian region increased by 10.2% y/y, while electricity consumption in the rest of Georgia decreased by 3.6% y/y. In 4M20, 53.8% of demand on electricity was met by hydro generation (-1.8% y/y), 28.0% by thermal generation (-11.1% y/y) and 17.4% of total supply was imported (+27.1% y/y). 52.4% of electricity was imported from Azerbaijan and the rest came from Russia (47.6% of total). Notably, electricity imports for Abkhazian region accounted for the third of total electricity imports and c.70% of imports from Russia.


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