The FINANCIAL — Economists’ opinions are split two ways: some think that the food supply-demand balance on the Georgian food market is uneven; some of them, on the contrary, claim that it is balanced.
Economic experts suppose that violations of the supply-demand balance caused a price growth of products and that’s why prices can’t fall any time in the near future.
A sharp rise in prices on the customer market has been noticeable since 2010. Food prices have increased by 33% all over the world. The National Statistics Office of Georgia announced that in January 2011 the inflation rate was only 12.3% compared to last year’s data. The office announced that prices for food and non-alcoholic beverages increased. The economists add to this list sugar, flour and oil. Statistically, during October of 2011 prices in Georgia increased by 4.2%. The largest price increases have occurred in vegetables – 11.7%, in fruit – 8%, and in sugar and confectionary products – 6.2%. Out of the most price-increased products porridge is the leader. It costs 4 GEL in groceries and 3.90 GEL in wholesale stores.
“The prices of those products which are in the minimum consumer basket have increased. There are 40 products in the minimum basket: bread, sugar, oil, dairy products, meat, fruit, vegetables and so on,” said Eter Kharaishvili, economist. “The reason for the increasing food prices is the devaluation of the GEL, disasters in 2010 that caused a restriction of food export to different countries. Export restriction damaged Georgia and small countries which aren’t yet economically developed. As there is a high decline in supply as well, I think that the prices of food will remain high for a long time. Due to a bad harvest the prices this winter are supposed to be higher as well,” said Kharaishvili.
The National Statistics Office of Georgia announced that in Georgia prices have increased mainly for those products which have become expensive all over the world as well. But economists have said that the prices of some products have increased in Georgia even more than in the world’s markets. “For example, sugar which is imported to Armenia from Georgia is cheaper in Armenia than in Georgia itself. The reason is a monopoly in the market, which is evident in those businesses that import. If it was the case of real competition on the market then food prices wouldn’t rise,” said Davit Papuashvili.
With prices increasing there is a noticeable deficit of local, Georgian-made products as well such a deficit of vegetables and dairy products. Also, production of beets, carrots and early vegetables has ceased. “Because the country’s economy is based on import, this sets back national production. Rural-agriculture production has lost its competitiveness. According to this year’s data, import exceeds export three and a half times. For example, 900 million USD of imports from Turkey are realized in comparison to the only 150 million USD of exports. Therefore import exceeds export 6 times,” said Papuashvili.
“A food deficit is one of the factors affecting price increases. Last year Georgian dairy product companies increased the price of milk price by 10 Tetri. Because of the deficit of natural milk, milk powder was used. But due to the world crisis, the production of milk powder was reduced as well and that is reflected in the product’s price as well,” said Kharaishvili.
According to the year 2010’s data, the food self-reliance index deteriorated and is below 40%. And, the correlation between national and foreign products on the Georgian market is ¼. Based on this data, economists have said that Georgia’s agriculture sector is in a very difficult situation.
According to last year’s data there was a deficit if milk in the Adjara region. Because of the crisis of milk and milk powder, companies reduced production by 50%. The companies raised prices and lost their clients. As economists said, in such situations, companies will be forced to lose clients or reduce production. In the case of problems continuing it is possible for the company to have to cease production all together.
Can Georgia produce enough food products for the nation’s residents as well as tourists to the country? Economists’ opinions split two ways in this case as well: some think – “yes, it can”; some not. “If Georgia doesn’t import food from other countries, it won’t be able to supply the whole market with its resources alone. Georgia can probably supply only 70% to local residents. The remaining 30% must be imported,” said Papuashvili.
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