“Georgian economy is picking up”
26 December, 2013
“Georgian economy is picking up”
Although the Georgian economy will grow 50% slower than expected this year, government officials believe a revival has started. For example, the number of enterprises that pay the Value Added Tax has increased, Nodar Khaduri, Finance Minister of Georgia, stated on 21 December in his report on 2013. Khaduri acknowledged that instead of the forecasted 6%, the Georgian economy will grow by less than 2.5% this year. However, the ray of hope coming from VAT-paying enterprises could be seen in October
and November, perhaps betokening economic recovery.
“This indicator has been negative until this October, and in October it increased to 5.9%, going as high as 14.4% by November. This is a very good indicator, it proves that there are signs of recovery in the country’s economy,” Khaduri stated, adding that the construction and import sectors also improved in November, and that the structure of the Georgian economy is changing – instead of the old “stick policy” he hopes that more freedom for business can be relied upon to stimulate the economy.
“Government does everything to make business free and property rights better protected, to create such a business environment that people will be eagerly producing and exporting products to European, Russian and neighboring countries’ markets that will encourage investments,” Khaduri said. He admitted that cohabitation and political uncertainty this past year affected the inflow of investment. Nevertheless, based on 9 months of statistics, Georgia got USD 20 million more in investments (USD 697 million in total) in 2013, compared to 678 million in the similar period last year.
Some economic analysts, including the Association of Young Financiers and Businessmen, believe Georgian government worked ineffectively this year: no efforts were made to assist small and medium business. Approval of an anti-trust law still proceeds slowly, giving rise to suspicion that authorities continue to have a bias toward certain businesses and their lobbyists.
Khaduri also indicated that increased transparency and social orientation of the state budget were unprecedented developments this year. For the first time, in the state budget the “other expenses” (which have exceeded GEL 1 billion in past years) were disclosed in detail. And the state debt remains stable: by end of 2013, it will account for 34.7% of the GDP, while foreign debt will make up just 27.2%. Forty infrastructure projects with the value of GEL 5 billion are ongoing, supported by preferential loans and grants from international financial institutions and partners.
To make taxation more liberal, the Ministry of Finances (MOF) initiated changes to the tax code this year, with the private sector involved in the process. Moreover, the Dispute Council operating with the MOF became more transparent, as the public sector has a larger role in the decision-making process. A representative of the tax ombudsman takes part in the work of this Council.
MOF improved service to taxpayers, too. An information call-center was set up at the Revenue service of MOF, and a one-stop window adopted. Furthermore, Khaduri emphasized that MOF became more open to the private sector. The Council of Advisers of the Finance Minister, initiated by Khaduri this year, includes independent analysts and sector pundits as well as non-governmental and science people. To ease communication with the state budget-supported organizations, MOF managed to put all of the 850 budgetary entities in one electronic system.
Khaduri expects next year to be much better than 2013: more investments, more jobs, and a brighter social picture are on the way. Infrastructure, education and agriculture will remain as priority sectors for the state budget.

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