The FINANCIAL — Francois Painchaud, Resident Representative of IMF in Georgia, predicted the Georgian economy to grow by up to 4.2% in 2018, up from the projected 4% this year. Painchaud held a conference at Tbilisi Courtyard Marriot on 7 November, 2017. The focus of his presentation was on economic predictions for the Caucasus and Central Asian region, otherwise known as CCA.
Painchaud highlighted some of the main trends that the countries representing the region should look to. CCA, comprised of 8 countries, was split into two categories, depending on whether the country in question imports or exports oil. The significance of oil factor was further highlighted after the drastic drop of oil prices in 2014-15.
Painchaud touched upon the subject of GDP growth in Georgia, projecting the growth rate improvement to be maintained, but also stating that GDP growth rates of 2000-2010 will, most likely, not be achieved.
When it comes to devaluation of national currencies, Painchaud gave disheartening news – the trend can be seen all across the CCA region, with no exceptions. Certain countries have taken a more relaxed approach to this issue, while others, including Georgia, have pushed for reforms in order to combat the trend.
The Georgian deficit was well below the regional average – standing at 3% in 2017, down from 3.6% last year, which means that the budget allowed both the needed fiscal consolidation and increased public spending. When it comes to the issue of budget, Painchaud also pointed out the direction in which the Government should work more actively, which is to put more effort and research in to finding the best projects to allocate resources to.
Unemployment could be a rising concern for Georgia in the future, as the labour force is expected to continue growing. For this reason, nurturing jobs should be of high priority for the country, especially considering the fact that unemployment has a tendency to manifest itself through other misfortunes, like increased crime rates and civil unrest.
Trade openness has been degrading globally. The reduction is even more significant for CCA countries, Painchaud stated. Georgia, however, is an exception to this rule, as its economic openness has increased substantially over the past decade – the country signed a DCFTA agreement with the EU, a free trade agreement with China and is currently holding talks with India, which is expected to be a superpower by 2022.
Painchaud addressed the Georgian banking sector and outlined some of the directions both the private sector and the Government should work in. Lawmakers should focus on enhancing prudential regulation and supervision, while the banks should strengthen corporate governance- the executive board should try to get more control over the business, he stated.
The country’s “portfolio” should not hold all its eggs in the same basket, as this makes the economy more vulnerable to shocks, said Painchaud, commenting on the importance of diversified and improved export. At the same time, he projected that successful work in this direction, which implies more openness and diversified export, could increase income of the country by 5-10% over the next 10 years.
On a final note, Painchaud touched upon the topic of financial inclusion. The percentage of 15+ years old Georgians who have a bank account is around 40%, which is miles above the rest of non-oil-importing CCA countries, but still a low-enough measure to call it problematic. Increasing financial inclusion would be one of the ways a country could boost its economic status, although the process has its own downsides as well.
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