The Georgian Parliament approved the state budget of 2022 on 17 December 2021. It contains allocations of approximately 19.2 billion GEL. The Ministry of Environmental Protection and Agriculture will receive 593.1 millions (3.1% of total budget allocation). MEPA will allocate 14.5 mln. MEPA will allocate 14.5 mln. 85.6% of the budget will be allocated to agriculture development and 85.4 million GEL. GEL (12.0% of their budget) will be spent on protecting the environment.
Budget for agricultural development is expected to decrease by 5.6% compared to 2021. The National Food Agency (NFA), and the Agency for Sustainable Land Management and Land Use Monitoring, (the so-called Land Agency), will receive additional state funds of 103.5% and 48.4% respectively. Budget for Georgian Amelioration will also increase by 1.5%. MEPA will increase spending on the joint Environmental Protection and Agriculture Development Program (43.8%) compared to 2021, but the budgets for the National Wine Agency and the Scientific-Research Center of Agriculture will decrease by 44.5% and 81% respectively. The Rural Development Agency’s budget will decrease by 6.8% from the previous year.
MEPA’s redistribution has been slightly altered, but the RDA will continue to receive the largest share of its funds (51.5%). GA (18.1%) and NWA (16.7%) will also receive the highest share. The RDA will continue to finance around 20 programs, including “Concessional Agricultural Credit”, which has the highest budget at 121 mln. GEL (46%). A further 40 mln. 40 mln. The remaining 10% will go to “Plant the Future” and “Co-financing Agricultural Mechanization”.
The State Budget of 2022 identifies core priorities for Georgian agriculture development:
* Improving the quality of locally produced agricultural products and supporting domestic production;
* Improved access to financial resources for agricultural enterprises and farmers;
* Supporting the development of land markets through the privatization and registration of state lands.
PRICE HIGHLIGHTS
DOMESTIC PRICES
The country’s prices rose on a monthly basis between December 2021 to February 2022. The Consumer Price Index (CPI), which measures prices, increased marginally (by 0.3%) in December 2021 compared to November. In January 2022, the prices rose by 1.1% compared to the previous month. In February, the corresponding monthly price increase was only 0.9%.
Food and non-alcoholic beverage prices, as measured by the Food Price Index, also showed an upward trend between December 2021 to February 2022. In December 2021 food prices increased by 0.8% from the previous month. In January and February, the respective month-over-month changes in prices were 2.5% and 2.0%.
The CPI continued to rise from December 2021 until February 2022. In December 2021 the CPI increased by 13.9% in comparison to December 2020. The corresponding YoY changes for January and February 2022 were 13.9% and 13,7%.
In February 2022 the prices of food and non-alcoholic drinks also increased significantly by 17.3%. This contributed 5.61 percentage points towards the change in the total CPI. The main drivers of the price increase were the following subgroups: Vegetables (+34%), Mineral water, soft drinks and fruit and vegetable juices (both +23.4%), and Bread and cereals (+20.4%).
SPOTLIGHT
Food prices have increased over the past two years. This is primarily due to international market trends reflecting concerns about decreased production, rising crude oil prices and COVID-19 restrictions. In February 2022 the escalating tensions around the Black Sea, followed by Russia’s full scale invasion of Ukraine, increased the pressure on the international food markets, which were already struggling with high prices. Ukraine and Russia are important trade partners for Georgia. These trends have quickly impacted local prices.
Vegetables: In this category, the biggest price increases were observed in cabbages (238%) and eggplants (81%). According to trade statistics from December 2021 to February 2022, the value imported vegetables increased 21%, from $8.7 mln. According to trade statistics, from December 2021-February 2022, the value of imported vegetables increased by 21% – from 8.7 mln. USD. A rise in the value of imported produce may indicate that imports are more expensive, and therefore prices have risen. It is difficult to determine the exact cause of a rise in vegetable prices as statistics on the quantity of imported vegetables and domestic production are not available.
Mineral waters, soft drinks and fruit and vegetable juices all saw price increases in February 2022. The biggest increases were seen in mineral water sparkling (25%) and still (29%) varieties. The trade statistics show that exports of mineral waters (both sparkling and still) increased both in value and quantity between December 2021 to February 2022. This could be a sign that the external demand is pushing up prices.
Bread and cereals: Within this category, wheat flour and wheat bread saw the biggest price increases in November 2021. They increased by 22% and 21 %, respectively. Russia is Georgia’s main wheat supplier, and its trade restrictions have affected the price of bread and cereals (Figure 2).
INTERNATIONAL PRICES
International prices showed an upward trend between December 2021 and January 2022. The Food Price Index, as measured by the Food and Agriculture Organization, rose sharply (20.7%) in February 2022 compared to February 20,21 and reached its highest level ever. The vegetable oil sub-index (36.8%), saw the largest price increase. The price of sunflower and palm oil were the main factors behind this sharp increase in vegetable oil. The increase in palm oil prices was due to the global demand for the product, coupled with a reduction in supply from Indonesia, one of its major exporters.
Concerns about disruptions in Black Sea region have also driven up international sunflower oil prices.
TRADE HIGHLIGHTS
The total exports of Georgia in January-February 2022 increased by a significant amount, reaching 760 mln. USD, which is 55% more than the same indicator for 2021 (492 mln. USD). Exports of agricultural products also increased, but at a slower rate (14%) from 140 mln. In 2021, agricultural exports increased from 140 mln. USD in 2022. The share of agricultural exports to total exports decreased from 29% in 2020 to 21% in 2022.
The total imports have also seen a notable increase of 47%, from 1,210 mln. In January-February 2021, the total imports increased by 47% from 1,210 mln. In the same period of 2022. The agricultural imports also show a similar trend of growth – from 152 million. In 2021, agricultural imports grew from 152 mln. USD in 2022 (43%) The share of agricultural imports to total imports is at the same level, with a slight decrease from 13% to 12%.
The depreciation in the Georgian lari during February may have contributed to increased exports, and if this trend continues will continue to affect them, while also putting downward pressure on imports. Overall, exports from Georgia have started the year on a positive note, and we hope that this trend will continue throughout the year.
It would be interesting if we could understand what is driving the high agricultural importation. The strongest growth in commodity categories can be seen by closely monitoring the following:
* Products of the milling Industry; malt, starches, inulin, wheat gluten (HS Code 11);
* Vegetable plaiting material; vegetable products not otherwise specified or included (HS Code 14);
* Live animals (HS Code 01);
* Lac; gums and resins; and other vegetable saps or extracts (HS Code 13);
* Dairy products; bird eggs; honey; edible animal products not specified or included elsewhere (HS code 04).
The milling industry has seen the highest growth, with a nearly seven-fold increase in products from 1,892ths. To 14,780 ths. USD (681%). This can be attributed to the rising price of wheat internationally and the ongoing conflict in Ukraine, which both hindered imports from Georgia’s major trade partners. Vegetable plaiting materials also saw a significant increase, up from 6ths. From 6 ths to 30 ths. USD (369%) and then an increase of 85% in the importation of live animals from 2,018ths. To 3,743 ths. USD. From 162 ths., the growth rate for vegetable extracts and saps is 82%. To 295 ths. USD. The respective changes in import value for edible products of animal source showed a 80% increase, from 8,212ths. The respective changes in import values for edible products of animal origin showed an 80% increase, from 8,212 ths. USD (Figure 3).
POLICY WATCH
The Government of Georgia will subsidise loans for annual crop production
The Georgian government will subsidise the interest rate on loans to farmers for the purpose of cultivating an annual crop. This sub-component is added to the Concessional Agricultural Credit project. The Rural Development Agency will cofinance the 12-month rate of interest on a subcomponent loan for 9 percent per year. The maximum annual rate of interest is 18 percent. Farmers will be able finance cash resources for the cultivation of annual crop, such as seed, planting materials, labor and rental fees, fuel for agricultural machinery and refining existing equipment.
For more information follow this link: https://mepa.gov.ge/Ge/News/Details/20722
The Rural Development Agency is implementing a new program to support Agriculture Cooperatives
The Rural Development Agency of Georgia, as part of the Co-Financing of Warehouses for Agriculture Cooperatives Initiative, will co-finance crop storage and cooling facilities that are designed exclusively for vegetables – primarily potatoes. The co-financing volume for a warehouse with a 500-ton capacity will be expressed in percentages – up 80% of the total and up to 450,00 GEL in absolute numbers.
For more information follow this link: https://www.gov.ge/index.php?lang_id=ENG&sec_id=579&info_id=81494
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