The spread of novel coronavirus COVID-19 has resulted in global pandemics, which was followed by an abrupt economic crisis, as economies stood still in order to overcome the threat to people’s lives. In this bulletin, we overview the readiness to the healthcare and economic crisis, the evolution of the pandemic and characteristics of the lockdown for the six countries in the Black Sea Region.

By the end of the second quarter of 2020, loans and deposits, expressed as a percentage of GDP, increased by 3.6 and 4.9 percentage points, respectively, compared to the beginning of the year; By the end of the second quarter of 2020, bank assets, expressed as a percentage of GDP, increased to 98.4%; By the end of July of 2020, the volume of loans was increased by 19%, compared to July of 2019; The average interest rates on loans in January-July of 2020 denominated in national currencies were 0.9 percentage points higher than in January-July of 2019, while the average interest rates on loans denominated in foreign currencies were 0.8 percentage points less; By the end of July of 2020, the volume of deposits in Georgia was increased by 21%, compared to July of 2019; The average interest rates on deposits in January-July of 2020 denominated in national currencies were 1.2 percentage points higher than in January-July of 2019, while the average interest rates on deposits denominated in foreign currencies were 0.4 percentage points less; In January-July of 2020 trade had the highest share of total loans with 29.5%; In January-July of 2020, share of construction in total loans increased by 3.6 percentage points, while share of financial intermediation decreased by 8.2 percentage points, compared to the corresponding period of 2019; According to the World Bank, Georgia’s ratio of non-performing loans to total loans decreased in 2019, compared to 2018, by 0.8 percentage points and dropped to 1.9%; By the end of July of 2020 the rates of dollarization on loans and deposits were increased by 0.3 and 8 percentage points, compared to the corresponding period of 2019. The rates rose to 56.9% and 61.3%, respectively.

The number of international travelers declined by 96.4% in August compared to the same period of 2019, while the number of international visitors fell by 96% and the number of international tourists fell by 95.4%; In the first 8 months of 2020, revenues from travel amounted to $483 mln, which is 78% lower than the same period in 2019; In Q2 2020, compared to Q2 2019, turnover of accommodations declined by 66%, and turnover of food facilities declined by 37%; In August 2020, compared to August 2019, yearly Hotel Price Index decreased by 32.1% in Guria and 21.7% in Adjara; In August 2020, compared to August 2019, the average price of guesthouses in Guria decreased by 58%, while the average price of 3-star hotels decreased by 35%; In August 2020, compared to August 2019, the average price of 4-star hotels decreased by 38%, while the average price of 5-star hotels decreased by 25%. The average prices of guesthouses and 3-star hotels registered a more modest decline.

In Georgia, the average cost of a room in a 3-star hotel was 128 GEL per night in August 2020. While the average cost of a room in a 4-star hotel in Georgia was 229 GEL per night and the average cost of a room in a guesthouse was 74 GEL per night. The average cost of a room in a 5-star hotel in Georgia in August 2020 was 367 GEL per night. In Guria, the average price was 776 GEL, followed by Tbilisi - 426 GEL, Kakheti - 360 GEL and Adjara – 346 GEL.

The number of international travelers declined by 95.6% in July compared to the same period of 2019, while the number of international visitors fell by 94.8% and the number of international tourists fell by 93.5%; In July 2020, compared to July 2019, the average prices of 5-star hotels decreased by 23%, which is the highest decline among the categories of the hotels; In July 2020, the hotel prices have decreased in 8 regions (out of 11), compared to July 2019. The most hit regions are Guria (-38.1%), Adjara (-26.4%) and Samtskhe-Javakheti (-23.5%); Due to distorted price data, the declines in hotel prices illustrated by our analysis are underestimated. Moreover, the analysis in July can be deemed conclusive just for Guria, Adjara and Samtskhe-Javakheti.

In Georgia, the average cost of a room in a 3-star hotel was 135 GEL per night in July 2020. While the average cost of a room in a 4-star hotel in Georgia was 223 GEL per night and the average cost of a room in a guesthouse was 73 GEL per night.

In the first half of 2020, external trade turnover in Georgia amounted to 5.054 bln USD, which is 18% less than corresponding period of 2019; Georgian exports amounted to 1.5 bln in January-June 2020, which is 16% less than in January-June of 2019. Moreover, Georgian imports deteriorated even more by reaching 3.5 bln USD, which is 19% less than in the first half of 2019; In the first half of 2020, Georgian trade deficit decreased by 0.55 bln USD (21%), compared to the first half of 2019; There are more EU member states amongst Georgia’s top 10 export partners in the first half of 2020, compared to the first half of 2019; In the period of January-June 2020, total trade turnover with the EU and Russia decreased by 22% and 16% respectively, but increased with China by 10% compared to the corresponding period of last year; Georgia’s main trading partners in the first half of 2020 were Turkey, Russia and China. Their shares in Georgia’s total trade turnover were 14%, 12% and 10% respectively; 77.4% of Georgian exports are concentrated amongst the top ten partners. Moreover, top ten import partners occupy 69.4% of total imports.

Due to the COVID-19 pandemic, global remittance flows are expected to fall by 20% in 2020 (World Bank), while the decrease in Georgia is forecast at 15% (IMF); In the first half of 2020, remittances have declined by just 4.8% compared to the same period of 2019; Remittance inflows have been growing by an average of 8.5% over the past decade; The contribution of remittance inflows in GDP has increased significantly over time and amounted 11% on average for the period of 2015-2019; In 2020, remittance inflows saw a sharp drop (-42.3%) in April, however, the recovery in June was also strong (17.8%), compared to the same period of 2019; Remittances from Russia declined the most in the first half of 2020 compared to the first half of 2019 (-27%), while Italy recorded the strongest growth (14%).

In the third quarter of 2020, Georgian economic climate has slightly improved. In this period, Georgian economists assessed Georgia’s present economic situation negatively; Moreover, the assessment of present economic situation in this quarter has improved compared to the second quarter of 2020, but worsened compared to the third quarter of 2019. In the third quarter of 2020, Georgia’s economic situation for the next six months has also been assessed negatively by Georgian economists. Furthermore, expectations for the next six months have enhanced compared with second quarter of 2020, but deteriorated slightly compared with the third quarter of 2019.

In Georgia, the average cost of a room in a 3-star hotel was 135 GEL per night in June 2020. While the average cost of a room in a 4-star hotel in Georgia was 223 GEL per night and the average cost of a room in a guesthouse was 73 GEL per night. The average cost of a room in a 5-star hotel in Georgia in June 2020 was 322 GEL per night. In Tbilisi, the average price was 471 GEL, followed by Kakheti - 327 GEL, Samtskhe-Javakheti - 279 GEL and Adjara – 273 GEL.