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Economic Growth at 4.7% instead of the Planned 5%

According to the 2014 results, the Georgian economy grew by 4.7% instead of the planned 5% – what is the reason? Why has the government failed to fulfill its forecast for economic growth for the second year?

In 2013, the plan of GDP growth was 6%, but in reality it did not exceed 3. 2%. The  forecast has been apparently failed in2014 as well.

However, in 2014 the situation is not as dramatic as in 2013 – the difference between the planned and  actual figure is much lower. Thus, if in 2013 the government explained the economic failures by a difficult period of coexistence with the previous government and past president, in 2014 no explanation has yet been made.

However, experts do not stint on evaluation. For example, the former President of the National Bank Roman Gotsiridze states that in 2014 there was a currency crisis due to the rapid devaluation of the GEL and in order to reach pre-crisis levels of the economy, at least one and a half years are required.

“The currency crisis occurs when the domestic currency depreciates by 25%. According to the International Monetary Fund (IMF), the average duration of these crises lasts for one and a half years. Usually, the flash of a currency crisis starts in a year and a half after the negative factors start to accumulate,”- he says.
According to him, the economy of Georgia has changed in 2 years.

“Today, our budget is socially oriented, it has expenditures which the government can’t cope with. Thus, the priorities have changed. On the other hand, the economy is burdened by different regulations, and instead of the free, we got some paternalistic economy in which all the incentives are in the hands of the state. The current President of the National Bank urged the government to revise the outlook on the economic growth of 5% in 2015. Authorities will have to adjust the budget that will be very difficult to do. The government does not want to cut costs, but is unable to attract the necessary revenues,”- says Roman Gotsiridze.

From 2006 to 2012 economic growth in Georgia has never been below 6%, with the exception of 2008 due to a war with Russia and the global financial crisis, and in 2009, when a 4% decline was recorded due to the global crisis.

Why has the government for the second year failed to reach the projected level of growth? Is the inconsistency in economic policy a reason for this? The government officials have no answer to this question.

As a rule, the current government explains the economic complexity by external factors beyond their control. This naturally raises questions about the competence of the government. A draft law on migration which restricts the employment of foreign nationals in Georgia indicates that it is not okay in this respect – in businessmen’s  assessment, the enactment of this  law will dramatically reduce the flow of investment into the country, which is already not too rapid Many representatives of the government do not agree with the bill but they do not make  the public statements  on this matter.