The year 2014 – a turning point to Georgian economy
16 January, 2014
The year 2014 – a turning point to Georgian economy
Georgian government believes the economic growth target of 5% is quite achievable this year. Almost 8% growth in November 2013 surely feeds the hope. Economic analysts and researchers think this year will be difficult but can be a turning point to growth and development if government undertakes a wise economic policy. Otherwise the economy is destined for complete failure.
By preliminary data of the official statistical body, GDP grew by 7.8% in November 2013 and average growth in eleven months
accrues to 2.6%, close to the targeted 2.5% forecast of International Monetary Fund and government. Actually the government hoped to attain 6% growth in 2013 but cohabitation and political uncertainty affected the year to such an extent that government expectation settled on less than 2.5% of growth. Although as Finance Minister Nodar Khaduri admitted, the structure of Georgian economy is changing: instead of the previously established “stick policy”, the freedom of business should become a drive force for the economic growth.
Analysts and researchers think that 5% GDP growth is possible thanks to the ongoing depreciation of Georgian national currency that devaluated by 5.4% in last two months and boosted inflation after two-year deflation [affecting Georgian economy for two years as a result of artificial strengthening of national currency by ex-power]. But if government does not improve the business climate as promised only devaluation of the currency cannot insure the growth. No efforts were applied to assist small and medium business in 2013. Approval of anti-trust law and package of changes to the securities law lingered starting past January up to date. This drag-out prompts some experts to suspect that authority still holds a selective attitude toward businesses and lobbies certain big business groups.
On the other hand, the restoration of infringed property rights is crucial, researchers say. As soon as the power changed in 2012, the Prosecutors’ Office was simply flooded by lawsuits demanding restoration of property and human rights. To facilitate the problem solution, authority decided to set up the said Commission. However, the issue lingered during the entire year and was postponed by an undefined period. No alternative remedies were suggested frustrating the private sector. In addition, as the New Year started, the government initiated a bill to ease access to tax secrecy [bypassing the court and tax payer’s consent] that made private sector and analysts indignant.
Ditrikh Muller, a co-founder of Georgian Investment Group+, believes that if government does not come up with a timely solution to the said issues, which are crucial for investments and economy, no growth would be in the prospect.
“Anti-trust law, securities law, protection of property rights and tax secrecy - all are crucial for business and investors. Investors should feel safe that once they invest in Georgia their rights will be protected, the market competition will be fair and their commercial secrecy untouched, and that the acquisition and sale of stocks will be equally easy and safe. Otherwise no reputable investors will step in here,” Muller said.
Soso Archvadze, an economic analyst, is optimistic toward 2014. He hopes that re-opening of Russian market will have a positive impact on income of Georgian population. Also he expects higher inflation rate this year and deflation process to be ended up.
According to him, political situation will be more stable and ensure clear business environment and freedom to entrepreneurs. Archvadze hopes the anti-trust law will become effective in this coming spring finally as government has just trumpeted. He also sees good signals that agriculture and tourism will get an impetus. “If global economic trends will be also clement 5-6% growth of GDP is quite possible,” Archvazde said.

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