This expert‑supported BAED Business Economics sample shows how students can structure analysis of Georgia and Batumi, linking GDP trends, consumption, employment, pricing, and government policy to the performance and prospects of the country’s fast‑growing automotive industry.
Many students find business economics challenging and often look for help in writing assignments in it when they must link real‑world data with macro and micro concepts. Adding this support makes it easier to analyse countries like Georgia, interpret indicators such as GDP, inflation, and employment, and connect them to industry performance in cities like Batumi.
This essay is intended to offer a detailed analysis and coverage of business economics which would mainly prioritise macroeconomic and microeconomic developments relating to a country. The country chosen for the conduct of this essay is Georgia while the city applicable is Batumi. Detailed industry description will also be substantiated in this essay that would also accommodate impacts experienced in recent times due to economic developments. The subsequent priority of this essay will be offered for discussing institutional and economic environments where governmental policies and initiatives and their subsequent impacts on investor’s decisions will also be briefly elaborated.
Georgia is identified to be a suitable economic market in Asia where the main economic hub is situated in Batumi which is the second largest city of the country. The current economic market in Georgia is identified to be a rapidly growing one where the country imposes a free market economy. A free market economy is identified as a plausible situation for a country in which industries and businesses operate on a perfectly competitive model where governmental intervention is limited (investopedia.com, 2023). This allows organisations and businesses located in Georgia to effectively manage available resources as well as adjust product and service prices based on available market demand and supply metrics. The industry chosen for this specific essay is the automotive industry where organisations boast high growth features due to an increasing number of car registrations that are numerically denoted as 9 million as of 2022 (tbccapital.ge, 2022).
7 Years | MA
The recent macroeconomic developments applicable for Batumi and Georgia fundamentally involve the establishment of favourable economic growth in 2023 which is estimated at approximately 7.5%. This growth is mainly facilitated due to a rapid surge experienced in construction and infrastructure development activities during recent times. Additional macroeconomic developments also involve the ability of Georgia to decrease its inflation by 9.8% in 2023 while the current core inflation rate is 2% when compared on a year-on-year ((YoY) basis. Macroeconomic developments also involve favourable movements experienced in Georgia where the unemployment rate in 2023 stood at 16.4% in comparison to 20.6% unemployment rate experienced in 2021 (worldbank.org, 2023). Macroeconomic developments also include growth experienced by Georgia in terms of exports and imports where a growth of 8% and 12% respectively has been observed in 2023. The current macroeconomic developments experienced in Batumi are mostly identified in terms of GDP growth experienced which is measured as 10.4% as of 2021 (bloomberg.com, 2021).
Additional macroeconomic development of Georgia can be determined in terms of money supply and balance of payments which stood at GEL 43.2 (M) and 428.8 (M) respectively (nbg.gov.ge, 2023). Hence, it can be determined that a high level of money supply and balance of payments exists for Batumi in recent times. The high level of money supply and balance of payments is considered as a beneficial attribute for an economy to facilitate export promotion due to which surplus monetary flow can be initiated (Esteves, 2022).
The Gross Domestic Product or GDP applicable for Georgia can be financially measured in terms of growth experienced in recent times which is 5.74% in 2024. However, the recent GDP growth for Georgia is identified to be lower than the GDP growth experienced in 2023 and 2022, both of which were respectively measured as 10.96% and 10.64% respectively. (statista.com, 2024). The main reasons associated with negative or declining GDP growth rate in Georgia involve lowering of the money supply or lack of adequate wage rates generated. The impact of GDP in the automotive industry is therefore considered to be adverse since lack of auto sales promotion due to decreasing demand and increasing aggregate supply.
Similarly, the GDP in Batumi is dependent on eight important elements including population, consumer expenditure, digital consumer and wealth. Additional elements further involve household durables possessed by individuals, economy, labour and transport respectively. Based on the above trends for GDP growth experienced in Georgia it is relatable that individual GDP growth in Batumi has also witnessed a negative growth in recent times. As critically stated and narrated by Cepni et al. (2020), negative GDP growth can be a harmful economic situation for an economy due to which global presence and dominance can be impacted. However, future prospects of growth in Batumi are expected to remain favourable as the city is identified as a proverbial hotspot for future tourism and automotive industries development due to which future GDP growth is expected.
The overview of consumption in Georgia can be fundamentally measured in terms of household disposable income generated in the economy which is measured as $ 30.04 billion in 2024. The additional metrics of assessment also include consumer spending in 2024 which is financially measured as $ 22.37 million while spending for food and non-alcoholic beverages is identified as $ 1.31 (000) during 2024. Figures of Georgian consumption can be additionally measured in terms of per capita spending applicable for Healthcare which is measured as $ 294.60 per individual in 2024.
Consumption figures measured in terms of alcoholic beverage consumption are valued at $ 0.45 (000) while per capita spending for education is identified as $ 43.49 billion in 2024. The consumption metrics in Georgia are further measured in terms of communication and housing which include individual values of $ 194.60 and $ 1.24 (000) in 2024 (statista.com, 2024a). Overall, it can be identified that consumption in Georgia has significantly grown in recent times which is mainly orchestrated due to higher purchasing power available to consumers. However, the increase in consumption is inversely proportional to growth in car sales since a rapid reduction is witnessed. However, the increase in consumption should encourage Georgia to create a high substitution and wealth effect due to which a better circular flow of income could be availed.
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Similarly, consumption in Batumi can be measured through cost-of-living terms applicable to products and services worthy of human consumption. These mainly include determination of the purchase cost of a vehicle distinguished in terms of KW trendline where the purchase price of 1.4l 90 KW trendline or equivalent and for 1.6l 97Kw cars are identified as 39,500 and 48,333.33 GEL respectively (numbeo.com, 2023). These figures of car purchase cost indicate relatively high purchasing power available to individuals which is substantiated on grounds of reducing inflation rates experienced in recent times. The consumption market in Batumi can also be determined in terms of the distributional expense model where human spending and consumption for transportation services is 26%. This is followed by food and restaurants and markets where consumption rates are 14.5% and 33.5% respectively. The recent consumption trend in Batumi indicates favourable progress as the lifestyle of individuals is identified to grow significantly due to which more spending is initiated.
The overview of employment trends can be identified in terms of the unemployment rate existing which is measured as 11.75% in 2023. The trend of unemployment in Georgia is identified to marginally reduce as figures in 2022 are identified as 11.85% (statista.com, 2023). The reduction in unemployment rate is considered a beneficial proposition for Georgia as an economy where efforts are being made to generate more employment opportunities by welcoming prospects of organisational commitments and investments. This can ultimately help Georgia to establish a strong global economic employment indicator due to which more household income and spending can be generated. The lowering of unemployment figures in Georgia also allows better opportunities that can be made available to youth due to which financial and psychological assistance can be provided to individuals in future. The lowering of unemployment figures are expected to boost sales in the automotive industry of Georgia in terms of pricing where effective pricing strategies for vehicles can be initiated to attract more sales through collective bargaining.
Similarly, employment in Batumi can also be measured in terms of existing unemployment rates which are largely contributed by 53% of individuals employed in the agricultural sector. The unemployment rate existing in Batumi also largely contributed to higher joblessness existing in the youth population which is measured as 29%, Lower education numbers and a decline in the age population towards the labour force are also identified to be significant contributors to unemployment which represent figures of 31% and 17000 respectively (worldbank.org, 2023a). Therefore, unemployment is identified to be at an all-time increase which is mainly stimulated due to higher job cards and people opting out of employment in Batumi during recent times. Therefore, unemployment in Batumi has significantly increased in recent times due to which future economic stability is likely to be disoriented.
The overview of prices in Georgia can be established in terms of the inflation rate existing which is measured as 2.49% in 2023. The trend of inflation is identified to be decreasing as figures extracted in 2022 and 2021 are 11.9% and 9.57% respectively (statista.com, 2024b). The lowering of inflation is identified as a beneficial proposition for Georgia in future due to which more savings and investments can be propelled as more financial holdings are expected to be preserved by individual and corporate households. The lowering of inflation also dictates Georgia’s strive to consequently lower taxes on generic commodities due to which more purchasing power and interest can be generated within the economy. The impacts of low inflation however do not have positive impacts on the automotive industry since lack of purchasing power available has hindered bulk auto sales in Georgia during recent times causing low market demand.
On the other hand, the prices of generic commodities and metrics of inflation in Batumi are safely positioned in comparison to annual inflation experienced in Georgia during recent times. The lower pricing available for generic commodities in Batumi further symbolises that purchasing power parity available to domestic and corporate households is relatively higher and this allows a better scope of influencing lifestyle and business growth simultaneously. The parameters of pricing in Batumi are also identified to be relatively lower when comparison is exercised with Tbilisi, the capital of Georgia. The standard or average pricing applicable for household consumption in Tbilisi is GEL 7,986.7 per month which is comparatively higher than GEL 6,600 identified for Batumi (numbeo.com, 2023a). Therefore, current inflation trends in Batumi have existed at lower levels during recent times.
The analysis of microeconomic effects can be fundamentally determined on the basis of a discussion of a detailed overview of the automotive industry existing in Georgia. Subsequent discussion on the impacts experienced in the automotive industry will be considered as part of the microeconomic effect analysis caused due to economic developments which are elaborated as follows.
The automotive industry in Georgia is identified as a competitive and proactive market which focuses on infrastructural development by employing a high-skilled workforce as well as by prioritising business-friendly climatic environments. State-of-the-art technological usage is also considered as a cohesive part of the automotive industrial development in Georgia where collaboration and innovations are deeply regarded as important key performance indicators. Prima facie importance in the automotive industry is offered towards considering a substitutional model where currently imports are being emphasised and vehicles are being shipped from China.
The imported model is planned to be substituted with production and manufacturing processes where more companies are expected to be brought on board due to which expected registered retail clients should go up to a population of 250000 (marketentry.ge, 2023). Facilities of assembling are also considered as part of the automotive industry development in Georgia where ancillary vehicular parts from Ford are expected to be utilised in future. The market structure applicable for the Georgian automotive industry is deemed oligopolistic since a few sellers or brands exist in the market. The impacts of any market distortions on price and operations due to oligopoly could reduce buyer consumption due to which automobile sales in future can decline (Nasution et al. 2022).
The industrial description applicable to the automotive sector in Georgia can be further determined in terms of industrial revenue forecasted to be generated from motor vehicle manufacturing. The forecasted figures for 2024 are expected to be $ 329 million which is expected to fractionally increase from $ 324.01 million, forecasted to be generated in 2023 (statista.com, 2024c). Overall, it can be identified that prospects and opportunities available for vehicle manufacturing in Georgia are favourable in future. This also allows major companies both international as well as local organisations to have ample scope and opportunity to maximise customer bandwidth and profitability features.
The impacts experienced due to the recent microeconomic and macroeconomic developments by the automotive industry in Georgia can be divided into two categories which are individually discussed as follows.
More Employment Opportunities
The first impact identified in the automotive industry of Georgia is associated with more employment opportunities generated in recent times. This is justified in terms of reducing unemployment figures extracted above as more automobile manufacturing companies are participating and investing in high financial figures to cater automobile manufacturing and marketing within Georgia. As per the opinions and expressions of Zhang and Hezarkhani (2021), direct manufacturing and marketing further allows organisations to formally communicate with prospective buyers and customers due to which more revenue generation and profit conversion can be achieved. The generation of high employment opportunities also allows manufacturers and automotive organisations to implement product varieties and facilitate manufacturing of joint or by-products in future. This should encourage industrial development within Georgia due to which future GDP growth can be expected that is mainly catalysed by growth experienced in the automotive industries.
Higher Federal Taxes Imposed
Higher federal taxes imposed are identified as the second impact experienced by the automotive industry in Georgia where a higher corporate tax is levied by the government on profits earned from operations. The increase in federal taxes is considered to be an impactful proposition for organisations which might jeopardise future operational sustainability due to which business growth and expansion within Georgia can be a difficult objective that is to be achieved. As critically illustrated and explained by Fox and Liscow (2020), the imposition of high corporate taxes can also subside the possibilities of a company investing within a specific country which can lead to distorted economic development in that region. The current corporate tax rate is 5.75% in Georgia and its further increase is likely to affect the import-substitution model due to which leading automotive organisations might cancel future projects and contracts (taxfoundation.org, 2023).
The institutional and economic environment primarily existing within Georgia is the Central Bank which imposes a cash rate policy that is applicable for all business houses and industries concerned. The current cash rate in Georgia as of May 2024 was measured as 8% which marginally reduced in comparison to 8.25% identified in April 2024. The average monthly cash rate growth in Georgia from 2008 to 2024 is also identified as 7% per annum (ceicdata.com, 2024). The governance of the Central Bank within Georgia is mostly related to banking and financial activities which also stipulates various guidelines that must be strictly followed by organisations.
The Georgian Stock Exchange (GSE) is the second institutional and economic platform whose environmental concern is mostly applicable to the trading and exchange of securities, bonds and stocks. The GSE is also responsible for creating a legislative framework that follows stipulations prescribed and guided by the USAID and American Experts. The nature of trading carried out within GSE is automated by nature where involvement of brokers in active or discrete capacities is allowed and the GSE is regulated by National Bank of Georgia (NBG).
Public Policy
Public policy is the primary government policy and initiative imposed since 2004 where preliminary Infosys is offered in terms of creating a viable link between medium-term and annual fiscal planning. The public policy applicable for industries including automotive also includes the creation of internal control and Audit systems as well as accounting systems which are recognised as per international public sector accounting standards. Subsequent importance is offered in favour of framing a robust revenue management process where mandates and initiatives relating to tax filing and tax violations are described thoroughly. The implementation of public policies are deemed to impact production and price levels in a positive manner where emphasis on tax collections are facilitated along with developing minimum wage laws and labour regulations. In this way, an economy creates more employment opportunities due to which bulk production can be made which in turn helps in price control.
Public Financial Management
Public financial management is the second government policy and initiative imposed in Georgia in 2008 that commits to creating a control mechanism to strategically use public funds. These are mainly used in favour of infrastructure development where validation is approved by World Bank and public expenditure and financial accountability (PEFA). The main motive of public Financial Management is associated with cutting down GDP deficit as well as creating an autonomous body that monitors tax audit systems and documentation processes at a local level. The impacts of public financial management are considered to be adverse for creating niche markets since it can reduce mobility of future investments due to the market being vastly restricted (Alawattage and Azure, 2021).
The implementation of public policy is an encouraging scenario for investors due to which favourable decisions and entrepreneurial initiatives are likely to be taken. These investor decisions could include more equity investments within a country as financial security and public participation available are expected to be bullish (Raut, 2020). On the other hand, the public financial management impacts are likely to create adverse investor decision-making facilities which are justified in terms of more governmental intervention and freedom allowed for business continuity. This can ultimately affect the participating psyche of automobile companies within Georgia due to which affordability on grounds of vehicular imports can become a challenging proposition in future.
5: Conclusion
This essay has established that the current market metrics and economic facilities within Georgia are mostly identified to be bullish as employment growth and growth in household consumption are identified in 2024. Based on macroeconomic indicators analysed in this essay, it is also determined that facilities of pricing are considered to contain favourable traits and characteristics in recent times, however, the trend of performance for GDP is identified to be abrasive as a steep GDP decline is witnessed. The industry analysis conducted in this essay is applicable to the automotive industry where recent emphasis on substituting import models is being planned to cater to domestic vehicular manufacturing and marketing.
The overall features and prospects of vehicular manufacturing are predicted to be bullish in this essay which is determined in terms of expected revenues that are to be directly generated from the production of automobiles in future.
References
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