Israel's war with Iran will hit Georgia's economy in a short period of time

The aggravation of the situation in the Middle East due to the conflict between Israel and Iran will have an impact on Georgia's economy in the short term, primarily on tourism, analysts at TBC Capital believe.

In 2024, Israel accounted for 5% of the total inflow of foreign currency into the Georgian economy and 10% of tourism revenues. To date, Israeli airspace remains closed to civil aviation. At the same time, despite the absence of official restrictions, due to the proximity to the conflict zone, flights from other countries in the region are expected to decrease, for example, from Saudi Arabia, which has recently been characterized by an increase in the share of income from tourism.

The Georgian travel company Medraft Georgia reported that all bookings from Israel in Georgia canceled for June, according to the business portal BM.ge . The forecast for July is also unfavorable.

The aggravation of the conflict between Israel and Iran may also have a negative impact on the gambling sector of Georgia, said the head of the Gambling Association of Georgia, Giorgi Mamulashvili.

"The gambling sector is closely connected with tourism. Citizens of Israel and Iran have become an important segment for the Batumi region. In recent years, their activation has led to an increase in the number of casinos and hotels, which in turn creates demand for catering companies and local services," says Mamulashvili.

According to him, in 2024, users from Israel accounted for about 35% of gambling services in Georgia. Accordingly, if this flow decreases, the Batumi region will lose certain revenues — both directly from gambling and from tourist expenses.

The aggravation in the Middle East has also disrupted supply chains, exporters expect problems in this direction. One example is blueberries, one of Georgia's exports.

"We were going to work actively in the Israeli market this year. We have three contracts for deliveries to Israel, but, unfortunately, they did not work out, and I do not think we will be able to deliver anything there in the near future," said Georgy Gviniashvili, Managing partner of Agrolane.

According to him, due to the aggravation of the situation in the Middle East, logistics was disrupted, it simply turned out to be impossible to deliver cargo. At the moment, the company has solved the problem with supplies to the UAE by using the route through Baku — but it is longer and transportation costs are rising. Despite this, the company decided to continue deliveries in order not to lose partners.