Financial Transfers into Georgia in the Wake of the Russo-Ukrainian War

Talk by Karine Torosyan (ISET Tbilisi) as part of the Research Seminar Series of the IOS Economics Department.

The Russian invasion of Ukraine in February 2022 has triggered a massive wave of financial transfers out of Russia.  One of the (temporary?) destinations for these transfers is Georgia, which in the year following the onset of the conflict has experienced  an excess inflow of funds from Russia equivalent to 11.2% of its GDP in 2021. Using data from the National Bank of Georgia, this paper  investigates the evolution of monthly financial transfers to and from Georgia before and after the onset of the Russo-Ukrainian war. While the inflows from Russia have risen sharply, there is no significant change in the pattern of financial outflows from Georgia, indicating that the funds from Russia have been “parked” in Georgia for the time being. The channels through which the funds are transferred include a few Russia-based money transfer services which dramatically increased their operations since the imposition of sanctions on the Russian economy. The case of Georgia illustrates the situation in several transition countries that have been experiencing the influx of funds being moved out of Russia due to the war. More generally, this case allows studying the impacts of hypermobility of financial flows on a developing country.