Home / Economy / Georgia Ranks 5th in terms of Economic Freedom
globus

Georgia Ranks 5th in terms of Economic Freedom

Georgia has advanced in the rating by 6 positions.

The Economic Freedom of the World has recorded changes. Georgia shares 5th-9th   places among 159 countries with equal scores. The rating reflects indicators since 2014 and measures economic freedom level (freedom of choice, markets penetration, private property protection, rule of law and so on), based on analysis of policy and institutions in 159 countries.

In 2015 Georgia ranked 11th  in the rating, while in the 2016 report the country has advanced by 6 positions to the 5th  place.

Georgia ranks 5th  among 159 countries in the international rating – according to the 2016 final report of the Economic Freedom of the World. The results were published by Canadian Fraser Institute.

The Fraser Institute develops an annual  rating – the Economic Freedom of the World, jointly with independent researchers and education institutions, members of the Economic Freedom network, from more than 100 countries of the world. This research is the most comprehensive comparison in 5 main components: the size of government; protection of property rights and court; strong money policy; international trade freedom; credits, employments and business regulations.

Georgia’s indicators have changed in 5 main directions (on 1-10 scale, where high coefficient signifies the high level of economic freedom size):

The size of government: during the last year the indicator slightly worsened from 7.85 to 7.83 point; Property rights protection and court: during the last year the indicator considerably improved from 6.19 to 6.61 point;

Strong money policy: in the last year the indicator improved from 8.92 to 9.11 points; International Trade Freedom: in the last year the indicator has not changed and stays at 8.45 point;

Credits, employment and business regulations: in the last year the indicator slightly declined to 7.90 from 7.91 point; According to the report, two indicators have worsened, two indicators have improved and one indicator has not changed.

As to the whole rating results, Hong Kong ranks first with 9.03 point on 10-degree scale. Other countries rank as follows: 2. Singapore (8.71); 3. New Zealand (8.35); 4. Switzerland (8.25); 5. Canada (7.98); 5. Georgia (7.98); 5. Ireland (7.98). 5. Mavrim Islands (7.98); 5. United Arab Emirates (7.98); 9 Australia (7.93) and 10. Great Britain (7.93).

The last 10 positions are occupied by: Iran, Algeria, Chad, Guinea, Angola, Central African Republic, Argentina, Republic Congo, Libya and Venezuela. As to such dictatorial countries as North Korea and Cuba, they are not included in the rating because of absence of indicators.

In rating, rankings of other major economies are as follows:

  1. the USA (7.75);
  2. Germany (7.55);
  3. Japan (7.42);
  4. France (57);
  5. Russia (6.66)
  6. India (6.50)
  7. China (6.45)
  8. Brazil

As to Georgia’s neighboring countries, Armenia ranks 18th with 7.71 point; Turkey is 90th with 6.86 point, Azerbaijan ranks 107th with 6.55 points, Ukraine is 135th  with 6 point and Iran is 150th  with 5.27 point.

According to the research and the most prestigious magazines, the people who live in the countries with high economic freedom level, get rich faster and enjoy more political and civil freedom. Similar countries also record  longevity growth evident tendencies.

For example, GDP of top four countries of the Economic Freedom Index per capita makes up 41 228 USD, when the same indicators of the last four countries is only 5 471 USD. Georgian Prime Minister Giorgi Kvirikashvili appraised the rating results as the positive information and urged government members of maximally spread it.

“I would like to tell you about very pleasant fact – international rating company Fraser Institute has published the 2016 report of Economic Freedom Index  and in this comparative index Georgia ranks 5th among the world’s 159 countries, following such countries as Hong Kong, Singapore, New Zealand and Switzerland.

This is huge success. For comparison, I would like to say that in 2015 we occupied the 12th position, in 2014 – 16th, in 2013 – 21st, in 2012 – 53rd. This is a serious progress preconditioned by advancement in such fields as attainability of finances, rule of law and property rights protection and other directions. This is impressive advancement, this is of crucial importance for Georgia’s international image and perception and all of us should maximally spread this information to draw more and more investments”, Giorgi Kvirikashvili said.

Minister of Regional Development and Infrastructure Nodar Javakhishvili noted that Georgia’s advancement in the  Economic Freedom rating will increase investors’ interest in Georgia.

“I believe all countries would be proud to occupy 5th position after Switzerland. This is of crucial importance for us, because Switzerland does not need so many investors, so much investment resources, while now we are implementing large-scale programs and we will need more and more investments. I believe this is a very goof characteristic for investor to arrive in Georgia without  hesitation”, Nodar Javakhishvili said.

Financier Vakhtang Khomizurashvili believes that the rating changes should be definitely reflected  on real economy and he made focus on undeveloped securities market.

“Economic Freedom, first of all, signifies property rights protection. At this stage, we do not have property protection in terms of securities. Securities market remains also undeveloped. In practice, we do not have open stock companies. We do not have legislative basis on stock companies. Secondly, Economic Freedom implies low unemployment level, but this indicator is very high in Georgia. Loan dependence is the third direction, when population and business sector do not depend on loans and loan capital very much and this component should be taken into account when preparing economic freedom index. I do not know whether all these indicators have been reflected there, but this is the reality. Changes must be reflected on economic conditions, portfolio investments and so on.

Therefore, considerations as if this moment has improved in our country are not realistic, nothing has improved in reality. Therefore, different evaluations may be provided, for example, tourists inflow, simplified visa regime and so on. Nothing special has happened. I just cannot see such improvement of  situation as they assert.

Economic Expert Paata Sheshelidze positively appraises Georgia’s advanced positions in the rating and also makes accent on worsened positions of other countries as one of the preconditions for Georgia’s promotion in the rating.

-We should specify that our country ranked 11th and now we share 5-9th places. This detail should be taken into account. We call it the 5th place, but in reality we share the 5th-9th positions. Nevertheless, this detail cannot underestimate the current results. The research is based on five components, of which two indicators have worsened, two ones have improved and one indicator remains the same.

In the end, advancement has overweighted the setback and we have improved our positions. The first component is the government’s size and the indicator has slightly worsened. The Government has spent more in relation to GDP compared to the previous year, it was 18% and became 19.6%. In reality, the Government provoked worsening the indicator in the rating. The second direction, where the Government played negative role is the category of regulations. This component comprises other parts in itself and several ones have worsened. Even in this part the Government cannot be proud of good results. However, there are good and positive factors too. Though, this category has showed worse tendencies ultimately.

We have progress in strong money part and this is the National Bank’s achievement entirely. We have made progress  in 2014, when the NBG was printing less money and emission volumes were of very modest scales. Consequently, we have better positions in this category. The second component implies transparency of legal system and property rights protection, but this party is mainly reflect indicators of the International Competitiveness Index, based on  surveys. Thus, we have significant advancements in this respect too. However, in most cases evaluations may be of subjective character. Therefore, I always stress that we have advancement here, but it is often difficult to check and examine this. As to international trade freedom, we have neither progress nor setback.

This signifies we have the same situation in this component. This year the Government has made no changes and this is neither good nor bad and the indicator has been maintained. In the end, achievements have overweighted the failures. We have made slight progress. The different is very small in terms of scores. Nevertheless, we have moved forward by several positions. Our positions improved as  other countries worsened their indicators and descended to our level. Their scores equalized to ours and consequently, our positions have also equalized.