‘Economy is supposed rather to slow down than increase’
10 March, 2011
‘Economy is supposed rather to slow down than increase’

Based on the preliminary data of Georgian statistics, Georgian GDP grew by 9.3% in January of 2011 compared to the similar period of 2010.  The major factors determining the economic growth come with construction and financial sectors that grew by 62.5% and 30% within the reported period respectively. 
The preliminary data of economic growth figures aired by Geostat, official statistics organization on March 2, 2011, indicate the increased activity of business; specifically, construction sector and banks. Official data of GDP

growth will be publicized by the end of March; however, based on preliminary data of last January, Zaza Chelidze, Director Executive of Goestat, presumes that results of the first quarter of the year will be positive, GHN news agency reported on March 2, 2011.
According to the preliminary data, business registration increased by 34% in January of 2011 compared to January of 2010, and turnover of companies paying the Value Added Tax (VAT) increased by 39.7%.
President of Georgia, encouraged by unexpected GDP growth figures,  is optimistic, believing that budgetary incomes may increase more than forecasted and he promised to increase pensions to GEL 100 by fall. But economic analysts find too early to judge the growing trends of economy based on data of one month’s data alone.
The economy growth figures seem unrealistic to Merab Janiashvili, Head of Young Financiers and Businessmen, who find no ground to almost two-digit economic growth in the country. To achieve such a high economic growth in January of 2011 positive moves had to be launched by end of 2010. But GDP grew to only 6% by end of 2010 and that makes unbelievable such a great leap in January of 2011.   Plus business refrains itself from economic activity due to too high inflation pressure accounting to 12% in fact. Economy is supposed rather to slow down than increase more than expected in such circumstances, he said.
Demur Giorkhelidze, an economic analyst, and Devit Narmania, Director Executive of the Center for Economic Problems Research, do not rule out that the growth really happened as far as statistics compares January of 2011 to the crisis-affected January of 2010 when economic activity was nearly zeroed.
“The year of 2010 was a crisis-year, in January of 2010 banking sector hardly went on insignificant profit after months of losses in 2009, and construction projects were halted entirely,” Davit Narmania, said. “This year economic activity is much more revived thanks to state’s activity in infrastructure rehabilitation and construction mainly, banks keep growing steadily as much as they avoid risky crediting and focus mainly on consumers service like provision financial operations. You know that all who buy and sell real estate/apartments are obliged to implement sale/ purchase transactions through banks.”
He also inclines to think that high inflation reasoned the questioned GDP growth but Chelidze assures that the inflation factor was taken into consideration during calculation of the 9.3% of growth.
Giorkhelidze thinks that construction sector really revived thanks to the government-supported Tbilisi rehabilitation project [through which reputable construction companies secured City Hall guarantees to get banking loans] initiated in fall of 2009. Construction works in frames of this project were carried out in 2010 actually.
“Of course it is not a real growth in fact as much as economic activity was on zero in January of 2010, but it is good that economic activity launched and went higher. The government-supported construction project facilitated to this breakthrough I think as much as commercial projects still stand still, and if thousands of apartments were sold before the crisis per month, now only few are sold. It is not surprising if we take into account that mortgage takes just 2% of banks portfolios, they develop thanks to consumer credits mainly, people still buy cell phones  and other show-off trifles that banks finance more willingly,” Giorkhelidze told Georgian Journal.
Both Giorkhelidze and Narmania find it premature to make any prognosis whether or not economic growth will go ahead or slump before two quarters of the year pass. Only then we can speak of trends, they say. 
But representatives of construction sector think that the growing trend will be kept. According to Irakli Kilauridze, one of the co-founders of Dexus, a company that took over assets of the biggest Georgian developer company Center Point, there is a growing trend in construction sector,  price correction is already through and construction sector is supposed to grow furthermore along with the Georgian economy.
“One of the crucial points is whether or not banks restore crediting of construction projects however,” he told GJ.
Goga Kapanadze, Director General of Axis, one of the leading developing companies, banks already restored crediting his company and the growth figure in his business is even higher than the growth of the entire sector provided by statistics, and all thanks to commercial projects.
“Our sales grew by 70-75% in fact in January,” Kapanadze said. “However we cannot claim that crisis will be overcome till all our halted projects are through. Untill  we meet all of our obligations against clients, we are in post-crisis period and I expect growing trend to be kept, as demand on completed projects is high and prices established,” he said.

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