Strategic Report 01 Strategy 02 03 04 Principal Risk/Uncertainty Key Drivers/Trends Mitigation Regional tensions The Georgian economy and our business Russian troops continue to occupy the We actively monitor risks related to regional may be adversely affected by regional Abkhazia and the Tskhinvali/South Ossetia tensions and political instability and develop tensions and instability. regions and tensions between Russia and responsive strategies and action plans. Georgia persist. Russia is opposed to the The Group’s operations are located in, eastward enlargement of NATO, potentially Despite tensions in the breakaway territories, and its revenue is sourced from, Georgia. including former Soviet republics such as Russia has continued to open its market The Georgian economy is dependent on Georgia. The introduction of a preferential to Georgian exports since 2013. In 2018, neighbouring economies, in particular Russia, trade regime between Georgia and the EU regional trading partners’ demand for Turkey, Azerbaijan and Armenia, which are in July 2016 and the European Parliament’s Georgian goods and services continued key trading partners. approval of a proposal on visa liberalisation to increase. The Georgian tourism sector for Georgia in February 2017 temporarily increasingly benefits from growing There has been ongoing geopolitical tension, intensified tensions between countries. The Russian arrivals as well as other visitors political instability, economic instability and Government has taken certain steps towards from regional countries. military conflict in the region, which may improving relations with Russia, but, as of have an adverse effect on our business and the date of this Annual Report, these have While financial market turbulences and financial position. not resulted in any formal or legal changes in geopolitical tensions affects regional the relationship between the two countries. trading partners, Georgia’s preferential Impact trading regimes and FTA’s support the The prolongation or escalation of political Relations between Russia and Turkey country’s focus on enhancing resilience instability, geopolitical conflict, economic remain uncertain, certain sanctions and to external shocks. decline of Georgia’s trading partners and any legal limitations on Turkish nationals remain. future deterioration of Georgia’s relationship Amendments to the Turkish constitution with Russia, including in relation to border were implemented in June 2018. The and territorial disputes, may have a negative amendments, which grant the president effect on the political or economic stability of wider powers, are expected to transform Georgia, which in turn may have an adverse Turkey’s system of government away from a effect on our business including putting parliamentary system. In June 2018 President adverse pressure on our business model, Recep Tayyip Erdogan won a new five-year our revenues and our financial position. term. His policy to influence interest rates questions Central Bank’s credibility and increases risks of capital outflow, which will negatively affect our region. Conflict between Azerbaijan and Armenia is ongoing. 59