What will be the foundation for rapid recovery in post-pandemic Georgia?

February 26th, 2020 – the first case of coronavirus was recorded in Georgia. The whole world, including Georgia, found itself in a rather specific circumstance. Governments, organizations, and the public have unanimously acknowledged that the pandemic has undermined belief in existing models for overcoming the crisis and traditional methods of stimulating the economy. The Georgian economy was no exception. How did the country cope with the first stages of the economic crisis caused by the pandemic? Did the anti-crisis plan work? The minister of economy and sustainable development of Georgia, Natia Turnava, reviews the current economic reality, challenges, and opportunities of the post-pandemic era.

How would you assess the anti-crisis plan developed to overcome the first phase of the pandemic crisis? What was the main achievement – especially in terms of business assistance, and, in retrospect, what could have been done better?

Developing a coronavirus crisis management plan was a fairly dynamic process. The measures taken under the Economic Support Anti-Crisis Plan were targeted and supported by all sectors of the economy and public groups that suffered, directly or indirectly, significant damage as a result of the COVID-19 pandemic. Despite all the challenges, Georgia has managed to minimize economic losses and start rapid economic recovery.  In September 2020, the economy shrank by only 0.7 percent, while the average January-September decline was 5.0 percent. Additionally, many sectors, such as agriculture, mining, manufacturing, trade, and finance, as well as insurance, education and health, and social services, saw growth in economic activity and value.

Business digitization measures have been taken in Georgia’s regions, and the world-leading accelerator, “500 startups,” has been introduced in Georgia.

How did the government work with the business sector during the pandemic? What is the current state of the UN Sustainable Development Goals implementation process?

Through economic recovery measures, implementation of structural reforms, programs aimed at the competitiveness of the private sector, and targeted social protection mechanisms, Georgia ensures the success of plans and indicators set within the framework of sustainable development goals.

At various stages of our pandemic management and the anti-crisis development plan, the state actively cooperated with the private sector. Changes in the design of state programs and the development of new programs in response to the existing challenges were carried out through active communication with the private sector. Moreover, the Ministry of Economy and Sustainable Development and the business sector have taken effective steps in replacing the demanded and deficient imported products with local ones, including the production of face masks, disinfectants, overalls, and various food products. Farmers who are engaged in growing perennial crops will be able to join the credit-guarantee scheme program offered by “Enterprise Georgia.” Under agricultural programs, loan interest rates will be subsidized for companies and individual entrepreneurs who require bank loans to grow perennial crops. This way, entrepreneurs will simultaneously benefit from two state programs – collateral and co-financing of the bank interest loan. Through economic recovery measures, implementation of structural reforms, programs aimed at the competitiveness of the private sector, and targeted social protection mechanisms, Georgia ensures the success of plans and indicators set within the framework of sustainable development goals. In this process, the Government of Georgia actively communicates with the private sector and civil society. Encouraging activities for the spectrum of the innovative entrepreneurial ecosystem, especially for innovative entrepreneurs, were planned, executed, and continued within a few days of the beginning of the pandemic. “Coronaton” was held, where successful projects of young entrepreneurs were revealed; entrepreneurs’ access to the necessary skills has increased, business digitization measures have been taken in Georgia’s regions, and the world-leading accelerator, “500 Startups,” has been introduced in Georgia.

The Ministry actively continues to work in the field of information and communication technologies. The “Log-in Georgia” project has been launched with the cooperation of the World Bank, aiming to increase access to high-speed Internet. The project will facilitate the use of digital services, e-commerce, as well as e-government services. The project will also support the development of remote learning, teaching, and telemedicine. We are working on the EU4Digital initiative, which aims to expand the EU’s single digital marketplace to create more jobs in the Eastern Partnership countries, as well as improve people’s quality of life, and support businesses. Through this initiative, work is underway with the EU and EaP countries on roaming tariff reduction, development of high-speed broadband internet, cybersecurity and trust services, e-health, innovation, e-commerce, and digital skills development.

Georgia has strong support from donor organizations and official creditors

I want to highlight the new legislative initiative, according to which it companies, in the framework of permitted activities, will be allowed to obtain the status of an international company, consequently, their income and profitable tax will be 5%.

What is your personal management strategy as a minister? What are your priorities as a decision maker?

The economic crisis caused by the coronavirus pandemic affects almost all aspects of public life, threatening fundamental economic ties and combining both demand and supply-side shocks. Therefore, in response to these challenges, it is necessary to take complex measures to reduce the negative impact of the virus on the economy on the one hand, and on the other hand, to promote rapid economic recovery in the post-crisis period. Georgia has developed various measures in terms of targeted fiscal, monetary, and structural policies, which will promote competitiveness in the business sector, support the most vulnerable groups in society, and strengthen social protection mechanisms. At the same time, we continue to implement structural reforms, improve infrastructure, support innovation and technology, and develop human capital. In state programs, we pay special attention to economic activities that have a high potential for rapid economic recovery, import substitution, and productivity improvements. Our strategy aims to advance domestic production and reduce external vulnerabilities, attract quality foreign direct investment, diversify trade, eliminate market failures, and, most importantly, maintain macroeconomic stability.

It is known that energy reform is being implemented with the support of the European Union and other partners, with the aim of creating a secure energy future for the country, the development of sustainable energy, and the establishment of energy independence. This issue, especially the construction of energy infrastructures, remains one of the most controversial topics for the public. What does it mean, and why is it important to acquire a balanced energy policy?

Any important project, especially in the energy sector, impacts many aspects and requires a balanced approach, public awareness, and active involvement. The Law of Georgia on Energy and Water Supply, which is the legal basis for implementing EU-supported energy reform, emphasizes the need to develop a national energy and climate plan. The policy document and the mentioned plan will be the basis for showing all the important directions and optimal coexistences between the necessity of energy infrastructure development on the one hand and the importance of meeting social and environmental requirements on the other hand.

Work has already begun on both documents, which will be discussed publicly before approval, and public involvement will be ensured in this process to maximize information on important steps forward for the country, and adopt and reflect on all possible considerations for optimal and balanced solutions.

What will be the stimulus engine that the government will use in the post-pandemic era for rapid economic development and the creation/ maintenance of sustainability?

Macroeconomic stability is the main foundation of rapid economic recovery in the post-crisis period, and a key priority of the Georgian government’s economic policy.

Macroeconomic stability is the main foundation of rapid economic recovery in the post-crisis period, a key priority of the Georgian government’s economic policy. The measures envisaged by the government’s post-crisis plan include addressing challenges rationally, assisting the private sector in overcoming key problems, promoting their competitiveness, and thus laying a solid foundation for continued economic activity. These measures also ensure the use of new opportunities arising from the crisis and global change. It should be noted that Georgia has strong support from donor organizations and official creditors. According to international financial institutions and rating companies, Georgia pursues a prudent macroeconomic policy, which is the main basis for economic recovery. The 2021 fiscal plans are in line with Georgia’s prudent fiscal policy and are also in full compliance with official lenders’ requirements. For instance, adherence to the current program with the International Monetary Fund (IMF) requires compliance with agreed fiscal parameters, as reflected in the 2021 budget. The reasonable fiscal policy is supported by the consistent and credible monetary policy of the National Bank of Georgia, contributing to price stability and economic recovery. To improve the economic structure, the Government of Georgia implements structural reforms, measures to improve the labor market and human capital development, and complex activities to further develop the business environment. It should be noted that the International Monetary Fund forecasts that in the medium term, between 2021-2025, Georgia will have the highest economic growth among the countries in the region. According to the IMF forecasts, the Georgian economy will recover the fastest among the region’s countries, starting in 2021-2022.

Our strategy aims to advance domestic production and reduce external vulnerabilities, attract quality foreign direct investment, diversify trade, eliminate market failures, and, most importantly, maintain macroeconomic stability.