The Country Director of the Asian Development Bank (ADB) for Georgia Shane Rosenthal wrote that the country has an unique opportunity to initiate a new era of growth that is more inclusive and diversified following their success story with the Covid-19 pandemic.
Rosenthal emphasized that Georgia’s relative success in containing the spread is thanks to its early action and effective enforcement. He claims that although the response to the pandemic will contribute to a fiscal gap reaching about 8% of GDP, Georgia has built up fiscal and foreign exchange buffers to help it weather economic shocks. Its economic policymaking institutions have also established a reputation for competence and strong governance.
She highlighted that the impact on public finances will be significant, and Georgia’s public debt-to-GDP ratio is expected to rise – from 44.5% in 2019 to 62.5% in 2020. In that regard, the Georgian government should pay even more attention to debt sustainability going forward, underscoring the importance of efficient expenditure programs and ongoing reforms to improve public services.
Finally, Rosenthal recommended five steps on which the Georgian government could build upon in order to establish a more diversified economy. First, Georgia must support the private sector by maintaining a resilient financial system. Second, improving access to finance for micro, small and medium-sized enterprises in order to achieve a broader-based recovery. Third, increasing access to finance for the agricultural sector. Fourth, boosting employment skills that are relevant to the modern economy, due to the fact that Georgia suffers from a skills gap that prevents many people from accessing well-paid jobs and constrains employers. Fifth, Georgia can seize the opportunity to develop more liveable cities through the development of “Green and Healthy City” areas.
On 3 April, the Asian Development Bank (ADB) delivered its forecast for the impact of the coronavirus pandemic on the Georgian economy. It further emphasizes that Georgia’s gross domestic product (GDP) growth will decline to 0% in 2020 as the impact of COVID-19 and lower oil prices constrain consumption and limit expansion in tourism and trade, but that Georgia’s economy is expected to bounce back with a 4.5% growth in 2021. Risks to economic growth include greater than expected sluggishness in trading partners’ economies, weaker than expected domestic demand, slower growth in tourism revenues, and tighter liquidity in global financial markets, in part reflecting the impact of COVID-19. The ADB report also highlighted the need for Georgia to promote technological innovation for business development (Caucasus Watch reported).
