Ostensible budget surplus
14 April, 2011
Ostensible budget surplus

Georgian state budget revenues increase by GEL 350 million. Government believes the growth in the revenue part is a result of economic development and boosts the GDP growth projections. Some economic analysts think the growth is caused by high inflation. Others argue the alleged budgetary surplus is a tool for masking the deficit.
Georgian legislative body amended the major fiscal document of the country on April 8, 2011as the revenues increased roughly by GEL 350 million. GEL 230 million out

of the figure will be diverted to the budgetary expenses that finance social priorities including increase of pensions of aged as well as invalids up to GEL 100 by fall of this year; some sums will be added to other healthcare-related social programs and infrastructure projects, and the remaining GEL 120 million will accumulate at the state treasury - GEL 100 million-worth Treasury Bills will be issued to alleviate the inflation heat standing at 14% as the yearly data.
Kakha Baindurashvili, Minister of Finances of Georgia, believes the revenue growth is a result of rapid economic development of the country and does not rule out to amend the state budget [he means in the growth direction] once again this year. Thanks to the recent growth Baindurashvili increases GDP growth projection from 4.5% built in the state budget to 5.5% and expects the figure to grow as high as 6-7% if the underway economic growth scenario is maintained. The deficit is supposed to shrink from the forecasted 4.3% to 3.7%. Nika Gilauri, Prime Minister of Georgia, thinks Georgia has already overcome the recession and is stepping up.
However, economic analysts do not share this kind of optimism. Davit Narmania, Executive Director of the Center for Economic Problems Research, believes the revenue growth is caused by two key factors: one is high inflation pressure that caused price hike at international market that in its turn jacked up volumes of Value Added Tax (VAT) and customs -based incomes that are charged for imported goods. And another factor is low projection of the state budget.
“They have artificially put the prognosis in the budget lower than expected so as to be able to get to the authentic data gradually. Now, when actually expected figures came true, they indexed them as a growth,” Narmania explained to Georgian Journal.
He finds quite possible the further GDP growth thanks to inflation again but stresses that GDP growth alone never means economic development of the country that obviously is halted.  
“The real indicator of economic growth is not total GDP growth but GDP growth per capita that is quite insignificant in Georgia and equals USD 3500 per capita, as well as employment and unemployment rate are crucial, both of them are not hopeful [based on official statistics the employment rate decreases and unemployment increases each year starting 2004 and stood at 16.9% in 2009 compared to 12.6% Of 2004-GJ]. According to official statistics, 40.9% of Georgian population is socially vulnerable and saying that we overcame recession when this data only worsens each day is not serious,” Narmania said.
Levan Kalandadze, an economic analyst, believes no budgetary surplus of GEL 350 million took place  due to inflation pressure or any other reasons. He expects inflation pressure to aggravate by the end of the year and thinks economic growth will fall far below 6%.
“All is a part of PR campaign, they faced a lack of financing in infrastructure projects and to disguise the deficit government invented this revenue growth scenario that now must be diverted on expenses,” he said.

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GEL Exchange
USD
1
USD
2.6413
EUR
1
EUR
2.9791
GBP
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GBP
3.3851
RUB
100
RUB
3.9608
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