The Impact of the Pandemic on the Georgian Economy and Ways of their Overcoming

Abstract

The pandemic has had the greatest impact not only on human life but also on the world economy. World governments are looking for a way out of difficult economic situation.

Pandemic is a global challenge where Georgia can’t be an exception. Georgia’s economy has been hit hard by the coronavirus pandemic and has been in deep shock. It has caused great damage to both the economy as a whole and the well-being of the people. Amid a severe lockdown in April 2020, the country’s real GDP fell by 16.6% compared to April 2019.

In the current situation, Georgia can only receive foreign loans. The total volume of external assistance amounted to $ 3 billion. In 2020 alone, about $ 3.5 billion was spent on anti-crisis measures. Anti-crisis measures provided targeted assistance to businesses. First of all, the funds were spent on subsidizing employee income tax.

At the end of 2020, Georgia adopted the updated 2021 budget. It is based on 4% GDP growth, an inflation rate of 3.5% and a budget deficit of 7.6%. At the same time, the share of revenues decreased by 1.6 billion compared to the previous year, while the share of expenditures increased by 2.4 billion GEL. The deficit was planned to be repaid with external and domestic loans in the amount of 5.3 billion GEL, including the issuance of new Eurobonds in 2021.

Against the background of the crisis, the volume of foreign direct investment has set a new anti-record and reached its lowest level in seven years.

Georgia's real GDP in the first six months of 2021 increased by 12.7% compared to the same period last year. This was facilitated by the growth of remittances, the export of goods, and the gradual return of tourists. Also, support from official lenders has increased external buffers. . According to the Fitch rating scenario, Georgia’s economic growth will grow by an average of 7.8% in 2021, which is 3.5 percentage points higher than in the previous study of the agency.

However, judging by the same data from Geostat, the acceleration of economic growth has not yet led to an increase in the welfare of citizens. 21.3% of the population in Georgia is still below the absolute poverty line, while unemployment has reached a record level of 21.9% in recent years, while inflation has reached 7.2%.

As for the direct impact of economic growth on the well-being of the population, today high inflation can become a heavy burden for the population and its negative consequences are more tangible than the consequences of high economic growth. Therefore, it is important for economic growth to be inclusive.

It is difficult to talk about economic recovery until the end of universal vaccination of citizens, since the probability of a new outbreak of the epidemic is high.