Issue 3, 2018. June-July

   

THE BEST MINDS IN THE BUSINESS: FAMOUS ECONOMISTS WEIGH IN ON GEORGIA

Investor.ge is piloting a new column: questions with internationally renowned economists. We are reaching out to economists from all over the world who have written popular and well-regarded books on the issues that are important to the Georgian economy and to developing economies, and to economists working at think tanks that are at the forefront of development policy. We pose questions about the issues they are working on that apply to the challenges Georgia is facing. If you have a question, or a recommendation on whom we should talk to, please contact us at amcham@amcham.ge

For the third column in the series, Investor.ge is looking at what international financial institutions and other international bodies are saying about Georgia's reforms and the country's economic outlook. In particular, the United Nations Economic Commission for Europe's recent findings on the impact of reforms on the trade sector; the World Bank's latest report on the Georgian economy; and the latest findings from the IMF.

Trade Reform

The United Nations Economic Commission for Europe (UNECE) named Georgia one of the top trade reformers in the region in a report published on May 3.

"With its lean institutional set-up and paperless trading environment, Georgia stands among the top trade reformers in the UNECE region," the organization announced.

"Today, it takes 30 minutes for imports to pass customs and documentary requirements are reduced to two documents only (transport document and commercial invoice or sales contract). Exports are cleared in only 10 or 15 minutes, depending whether standard or advance procedures are used. Georgia exported goods worth $2.11 bn in 2016, and imported goods worth $7.27 bn," the report said. The study was conducted during the period of October 2017-January 2018.

It included assessments from traders working in Georgia, as well.

"Moreover, the 65 traders from across the country representing leading sectors, expressed their appreciation of the procedures' high level of transparency in interviews. Traders are kept abreast of trade-related regulatory and procedural requirements through online information dissemination systems and public-private consultations managed by the different line Ministries," the report said.

"Reaping further benefits will require strengthening state agencies with technical skills and expertise, particularly for completing the approximation to the European Union Acquis Communautaire; consolidating the existing paperless trading systems; and, improving the country's transport infrastructure," the UNECE noted.

Economic Development

The World Bank's 2018 Systematic Country Diagnostic (SCD) "highlights the country's core development challenges and opportunities. It takes stock of Georgia's development progress since its "rebirth" a quarter of a century ago. It also takes a forward look at the social and economic landscape," the report states.

The SCD notes that Georgian economy suffered a 65-percent contraction over three years from 1991-1993, an "unprecedented economic collapse," even among former Soviet republics.

Over the past ten years, however, the Georgian economy has made real progress, the authors of the SCD note.

"Georgia is a fundamentally different and better country today than it was a generation ago. Georgians can be proud of having achieved middle-income status, dramatically reduced extreme poverty to 8 percent, and implemented social policies that support the poorest people and regions. At the same time, the country is still far from the level of broad-based prosperity that EU accession countries now enjoy," the report said. The SCD highlights the challenges Georgia faces as it seeks to create sustainable growth, and warns that, among other things, the government needs to watch spending and prioritize protecting the environment.

"In the absence of sound macroeconomic and fiscal policies, attracting investment, financing the required infrastructure, and upgrading service delivery will not be possible. Likewise, environmental degradation would undermine a key asset of the country in leading sectors of the economy, namely tourism and agriculture," the report said.

Reform Program "Advancing Well"

Mercedes Vera Martin, the IMF mission head, praised Georgia for meeting many of its structural reform benchmarks.

"Sustained implementation of Georgia's economic reform programme is expected to support higher and more inclusive growth by fostering private investment, productivity, and competitiveness," she was quoted as saying in an April statement published by the IMF mission as part of its announcement concerning the third tranche of a three-year program.

Martin noted that economic growth was expected to remain strong this year and the country's risks are balanced. The current account deficit will likely widen, she warned, due to higher oil prices and public investment, the statement said.

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