(adds quotes, details, background) By Jonathan Lynn GENEVA, Sept 18 (Reuters) - Foreign investment has begun to trickle back into Georgia as the free-market economy shrugs off the impact of last month's war with Russia, Georgian Prime Minister Lado Gurgenidze said on Thursday. Gurgenidze said it was too early to give a precise forecast for foreign direct investment (FDI) this year, although it was clear that inflows would be well below last year's levels. FDI would probably be within a $100 million to $300 million range from now to the end of the year, after $1 billion in the first half and $2 billion in the whole of 2007, he told Reuters. Georgia's stock of FDI now accounts for 60 percent of the $13 billion economy, the sixth highest level in Europe, he said. Earlier, Gurgenidze told a conference in Geneva on Russian hedge funds the war had not hit the economy hard so far. "We've gone through some fairly difficult days but basically it's business as usual. Certainly it's business as usual in banking," he said. "Resilience is our middle name." Georgia was continuing to export electricity and had fixed damaged infrastructure, including railways, and the port of Poti was seeing normal cargo volumes while all scheduled flights were also operating. GROWTH HIT But the conflict would dent economic growth rates, which has been running at 10 to 12 percent for the past three years, he said. "This conflict will cost us a few percentage points of GDP growth," Gurgenidze said. Real estate transactions and car registrations are both about 30 percent lower than a year ago, he said. Besides the war, Georgia has not escaped the financial market turmoil shaking the rest of the world. The central bank made about $210 million available to banks through two new facilities 10 days ago, but in a sign of confidence banks have taken up only $80 million so far, he said. Since Aug. 1 the Tbilisi stock market has fallen 37 percent, but Bank of Georgia, the main component in the index, was up 12 percent on Thursday in a flight to quality, he said. Gurgenidze's presentation to the Jetfin conference was part of an intense investor relations campaign by the U.S.-educated banker, which sees him talking to investors in London on Friday, and in New York and Washington in mid-October, after a big emerging markets conference in Istanbul two weeks ago. His efforts to retain investor confidence have been helped by an $750 million loan programme from the IMF, while the U.S. has pledged a $1 billion economic recovery package. Gurgenidze said that the free-market policies of President Mikheil Saakashvili's administration remained in place. These have seen Georgia simplify and drive down taxes, ban budget deficits, and eliminate import tariffs. Inflation -- one of the major policy concerns in emerging markets -- spiked a monthly 3 to 4 percent in August because of supply disruptions in the war, after slowing to single figures at an annual rate in July. The central bank retains an 8 percent inflation target, and single-digit targets are now legally mandated, he said. "I don't think there should be any doubt that single-digit inflation in Georgia is well within our reach," Gurgenidze said, also noting that privatisation in his country is ongoing, with the largest supermarket chain completing a rights issue to institutional investors at the end of August. (Editing by Matthew Jones)
Relatives of Major Shalva Dolidze, a commander of 1st Battalion of 4th Brigade of Georgian Army killed in the conflict with South Ossetia, attend a memorial service at the cemetery in ...
