ArmInfo.Russia's ban on flights to and from Georgia is likely to weigh on Georgian economic growth and could hamper the reduction of the sovereign's external vulnerabilities, Fitch Ratings says.
The flight suspension from July 8 will chiefly affect Georgia's economic growth and external finances through its impact on tourism. Tourism has grown in recent years, contributing about 7.5% of GDP and 70% of service exports in 2018. It has contributed significantly to the narrowing of the country's structurally large current account deficit. A reduction in tourism earnings from Russia (which more than tripled to 4.9% of GDP between 2014 and 2018) could therefore hinder this improvement.
Russian tourists accounted for 20.9% of total tourist arrivals last year. Russian visitors mostly arrive by road, and a decline in Russian arrivals could be partly offset by an increase in visitors from other countries (about one third of tourist arrivals last year were from Azerbaijan and Armenia).
Russia is not a major source of FDI, accounting for 5% of total FDI last year. Nevertheless, lower tourism inflows coupled with possible lower FDI present a risk to our GDP growth forecasts, currently 4.6% this year and 4.7% in 2020.