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Georgia: The collapse of international tourism hits the Caucasus republic hard

News from 2020-06-03

Georgia is considered the reform champion in Eastern Europe and Central Asia. The government has succeeded in fighting corruption, improving the investment climate and establishing itself as a transit country and destination for discerning tourists from all over the world. However, with the corona crisis, tourists and business travellers stay away and Georgia plunges into a deep economic crisis. KfW is supporting the Caucasus Republic in cushioning the consequences of the crisis for the population.

The Georgian Government reacted quickly and comprehensively to the corona crisis. Even before the first infection was officially reported, Georgia introduced a compulsory quarantine for travellers from countries particularly affected by the virus (including Germany as of 12 March). With the declaration of a national emergency on 21 March, all borders of the country and all international airports were closed for normal passenger traffic. The closure of all shops, restaurants and hotels, the suspension of public transport and even private car traffic, and a night curfew brought public life to a complete standstill during the Orthodox Easter in mid-April. In comparison to Germany, many Georgians live with their parents and grandparents in a common household. This contributed to a broad understanding among the population for the drastic restrictions in private life.

Menschenleere Gasse in Georgien
Deserted places in the touristic old town of the Georgian capital Tbilisi.

With these drastic measures, the Georgian government successfully contained the spread of the corona virus. This was repeatedly praised by international observers, such as the World Health Organization. By the end of May 2020 there were only 794 confirmed cases of infection and 12 deaths in Georgia.

Parkautomat mit Hinweis
Stay Home: Public transport display board in front of the Philharmonic Hall in Tbilisi.

However, the economic consequences of the crisis weigh much more heavily. Tourism, which had grown strongly in recent years and is responsible for around 20% of Georgia's GDP, came to a complete standstill. This is having a devastating impact on hotels and restaurants, but also on the inhabitants near the Georgian national parks, which were established with the help of German Development Cooperation (see also An ecological treasure on KfW Stories). The service sector, agriculture and the manufacturing industry have also been hit hard by the crisis. A deep recession and a rapid increase in poverty are therefore expected in the country in 2020.

The Georgian Government asked international development partners (including KfW) for support as early as the beginning of March to cushion the medical, economic and social consequences of the crisis on the population. On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) KfW has since been preparing reform financing in close cooperation with the World Bank to strengthen the crisis resilience of the Georgian economy. There are also plans to make a financial contribution to the support package for population groups particularly hard hit by the crisis. These include informal workers, members of ethnic minorities and internally displaced persons from Russian-occupied areas.

Since 18 March the KfW office in Tbilisi has been closed and all staff members have been working from home. Meetings with partner ministries, other development partners and the KfW Head Offices in Frankfurt now take place only virtually.

For Natia Gozalishvili, project assistant in the KfW Tbilisi office, working from home was a challenge at the beginning. She says: ''We have a small apartment and I had to find a suitable place for myself to work undisturbed by my family, who were at home all day. I also found out how comfortable my chair was in the office. But after two months working from home, I got quite used to the new routine and the virtual meetings with colleagues work quite well. The hardest thing, not only for me but for everyone, was that people's social life was restricted. What used to be part of everyday life was suddenly no longer possible. Even the most important holiday of Georgia, Independence Day on May 26, which is usually celebrated with a beautiful fireworks display, church services, concerts and other public events, did not take place this year.”

Since mid-May, the Georgian government has been trying to gradually reopen the country without risking a second wave of infection. The national state of emergency was lifted on May 22. Shops and offices are allowed to open under strict hygiene conditions. This includes compulsory wearing of masks in shared rooms, daily fever measurement of all employees and daily disinfection. The KfW office is currently preparing to implement these regulations to enable a return to normal operations.

Mann bekommt in Eingangsbereich Fieber gemessen
KfW Office Manager Giorgi Chkuaseli undergoing temperature check at the entrance to the KfW office.

At the beginning of July, the country wants to reopen itself to international tourism. Income from tourism is an important prerequisite for quickly overcoming the economic consequences of the crisis. Despite this positive development, it will take a long time until Georgia recovers from the consequences of the Corona crisis. Until then the country will continue to depend on foreign support.