In the second quarter of 2022, the Business Association of Georgia (BAG) published the findings of a new survey in its BAG Index series that examined the effects of the Russo-Ukrainian War on businesses.
The survey found that 62% of the surveyed companies reported that the conflict and sanctions imposed on Russia hurt their operations. Among them, 12% of businesses reported that the impact on their company had been extremely bad, 22% indicated that it had had no impact, and only 3% had a favorable effect. According to the research, the trade sector was the worst damaged, with 71% of businesses reporting being negatively impacted and 11% stating that the impact was highly unfavorable.
An in-depth analysis of the enterprises that mentioned deteriorated trade ties with Russia as a barrier to their economic activity revealed that payment concerns (68%), hampered logistics, particularly problems with freight insurance (58%), and Russian export restrictions (39%), were the leading causes. Notably, reputational issues (26%) and trade partners' being classified as sanctioned businesses (19%) were the least mentioned causes. 72% of businesses cited logistical issues in the global market as the aspect of the Russia-Ukraine war and its sanctions that had the most significant impact on their businesses, followed by higher prices for intermediate goods (56%), hampered imports-exports with Ukraine (48%), and worsening trade relations with Russia (39%). However, when it comes to the commerce sector, logistical issues were most frequently identified as a hindrance (90%). In comparison, the deterioration of commercial ties with Russia received the least mention (41%).
Similar to the manufacturing sector, logistical issues in the service industry were most frequently mentioned (57%), while worsening trade ties with Russia received the least attention (33%). However, the building industry gave the highest percentages of the blame for rising intermediate-goods costs (78%) and logistical issues (78%). The least-mentioned issue in this instance was again the deterioration of commercial relations with Russia (33%).
Last but not least, in the industrial sector, the most frequently given issue was hampered import-export with Ukraine (82%). In comparison, factors like rising costs of intermediate goods (55%) and deteriorating trade ties with Russia (55%) were less frequently noted. The majority of businesses questioned (85%) stated that they do not anticipate that the conflict in Ukraine and the ensuing sanctions against Russia would affect the number of workers at their organization. In actuality, just 8% of firms anticipate a decline in staff numbers, and only 1% anticipate a large one.
Manufacturing was the industry where employers expected the number of employees to shrink the most (28% of businesses), while the trade sector had the lowest expectations (3%). The majority of those anticipating a decrease in employment (67%) believe it will be between 1-20%, 25% believe it will be between 21-40%, and 11% believe it will be between 41-60%. Notably, none of the businesses anticipated a decrease of greater than 60%.
When asked if the Russian invasion of Ukraine and the ensuing sanctions would affect product pricing in the short term, 46% of the firms questioned said they did not anticipate it, while 39% predicted price rises and a further 3% predicted considerable increases. Notably, predictions for price rises were significantly higher in the commerce sector (52%), followed by the construction industry (45%), and significantly lower in the service sector (35%).
