Standard & Poor’s: Expected rise in Russian gas price will exert moderate influence upon real economy growth rate in Georgia

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The expected rise in Russian gas price for Georgia by Gazprom (Russia) from $110 to $230 for 1,000 cubic meters will, most probably, exert moderate influence upon the real growth of the Georgian economy, it will be only 1.1% of GDP, Standard & Poor’s rating agency believes. According to the agency, the estimation is based upon planned volume of gas imports in 2007, which is 1.7 billion cubic meters, with its total price of $391 million (at the price of $230 per 1,000 cubic meters).

It is $204 million more than the planned cost at the previous price, which equals to 2.9% GDP. The Georgian authorities, nevertheless, expected such rise and took precaution measures to secure alternative gas sources, including reconstruction of gas pipelines from other countries. Thus, the real influence upon the economic growth will be much lesser, as Georgia will receive 200 mln cubic meters of gas from the South-Caucasian gas pipeline in 2007, as well as additional 50 mln cubic meters at a low price ($55 for 1,000 cubic meters). Moreover, one of major gas consumers in Georgia, Saktsementi, intends to use coal in case the gas price increases, which will reduce the imports by about 300 million cubic meters (1% of GDP at the new price).

Meanwhile, as Standard & Poor’s believes, the crisis in relations of the Georgian and Russian governments, including the trade and transport blockade can have a more serious impact upon the economy in general and increase the political uncertainty. It can affect negatively Georgia’s credibility in future, Standard & Poor’s notes.

Commenting on the situation with rise in Russian gas price for Georgia, Georgian Finance Minister Alexi Alexishvili told reporters that “the possible rise of Russian gas price will not have significant negative impact upon the Georgian economy.” “Such decision made by the Russian side will not halt the trend of the Georgian economic development, and the country’s government will continue the policy of reforms,” Alexishvili stressed.