The FINANCIAL -- Georgian Consumer Confidence (CCI) continued to improve in August 2017, gaining almost 5 index points over the previous month (July 2017) and more than 12 points over August 2016.
Ignoring the rather wild pre- and post-election swings in the index, the CCI appears to be on a steady upward trend since bottoming out in fall 2015. In August, the CCI climbed to -16.5 points, which is almost 25 index points above its value in September 2015. This increase was driven by roughly equal improvements in both consumers’ expectations and their assessment of the present situation. Still, the CCI remains well below the peak achieved in fall 2013.
It’s all about tourism, stupid!
The recent surge in consumer optimism appears to be reflecting very strong growth in Georgia’s tourism and hospitality sector. According to the Georgian National Tourism Administration (GNTA), 5.06mln international travelers visited Georgia in Jan-Aug 2017, an increase of 19% over the same period of 2016.
Even more impressive is the 29.4% (!) increase in the number of tourists (visitors staying longer than 24h), who currently account for almost a half of all international arrivals (2.4 out of 5.06mln). These numbers are certainly a boon for the Georgian economy, immediately translating into many (seasonal) jobs, higher wages, profits, foreign currency earning and tax revenues. In the medium term, the tourism sector attracts a lot of investment in real estate, hotels, hospitality businesses and their supply chains.
One source of concern for the future of Georgia’s tourism industry is the very strong seasonal variation in the number of international arrivals and, particularly, tourists. Arrivals are extremely concentrated in the three summer months: 50% and 54% of the total in 2016 and 2017. The gains in arrivals (and tourism) that we observe in 2017 are also very concentrated in the summer. The negative implications of summer over-tourism are obvious: congested transport and hospitality infrastructure, over-pricing and under-delivery of services, and mounting pressures on the environment. The flip side is also quite negative: a lot of under-utilized capacities and under-employed labor during the long low season.
Nevertheless, judging by the CCI, the Georgians appear to be busy celebrating all the way to the bank, and are not particularly concerned about the low season ahead.
Tbilisi vs. Rest-of-Georgia
Late summer and early fall is the best time for Georgia’s rural population, for which agriculture and tourism are key sources of income. In August, rest-of-Georgia edged ahead of Tbilisi by 1.6 CCI index points; its relative gains are particularly impressive when compared with the cold winter months. In February 2017, the gap between rest-of-Georgia and Tbilisi’s CCI reached a historical maximum of almost 10 index point (-25.9 for Tbilisi compared to -35.4 for rest-of-Georgia).
When splitting the sample into “young” and “old” (above 35) categories, we notice a strong increase in both, however, most of the gains for the young have been observed already in July, whereas it took until August for the older Georgians to grow in optimism. Since June, the young and old groups gained 9.8 and 7.7 index points, respectively. Breaking down the August date, we can see some additional nuances. Perhaps not surprisingly, younger Georgians are more optimistic when it comes to their personal ability to save and make major purchases. Older Georgian, however, are more positive in their assessment of Georgia’s economic future as a country.