After posting strong growth for years, the pandemic brought Georgia’s economic expansion to an abrupt halt. But the government’s multi-pronged effort to provide liquidity, coupled with an encouraging start to 2021, means that Natela Turnava, minister of economy and sustainable development, is bullish on the country’s recovery prospects.
Q: How has the government supported the economy during the pandemic?
A: Our first reaction was to make sure companies had sufficient resources to retain employees and cover any liquidity gaps. Many firms had taken out loans when the economy was growing rapidly from 2017 to 2019, but it became challenging to service them when Covid-19 started. So, we subsidised interest rates and intermediated the restructure of loan obligations. As property values had diminished, we also expanded the credit guarantee scheme that helps provide collateral for loans. We accelerated plans to reimburse value-added tax instantaneously, and partially suspended personal income tax collection to help co-finance salaries. Also, throughout the pandemic we haven’t stopped investing in public infrastructure, including upgrades of our three international airports.
Q: How important is foreign investment to your economic strategy?
A: Foreign direct investment (FDI) has always played a major role in our economy. We value it as a natural source of funds and transfer of technology, knowledge and corporate culture. From 2013 to 2017, FDI as a proportion of gross domestic product (GDP) was 10–12%. Since then, it has dropped to 7–8% but it’s still three-times higher than the regional average.
We fully understand that to boost FDI in the post-Covid-19 era, we need to be even more aggressive to attract investors as the competition between countries — especially in the emerging world — has become sharper. It’s a matter of making our investment climate better than in 2019: we are competing with our own achievements.
Q: What are your hopes for Georgia’s future relationship with the EU?
A: Our core values and principles as a country have always been closely aligned with those of the EU. It isn’t just a political decision: it is the existential choice of the Georgian people.
The declared political priority of our party is to apply for EU membership in 2024. We have already approximated more than 150 laws and sub-laws towards EU legislation. We are putting special emphasis on the fulfilment of obligations under the EU Association Agreement to ensure macroeconomic stability, which is a prerequisite for membership. The EU is already Georgia’s biggest trade partner, with a 22–23% share of our exports, and the number of companies, especially small and medium-sized enterprises (SMEs), exporting to Europe grows each year. We are also pursuing a connectivity programme which builds all types of infrastructure that brings Georgia closer to EU markets. For example, with funding from the World Bank, we are conducting a feasibility study for a high-voltage power cable under the Black Sea to exchange green energy between Georgia and the EU.
Q: What are your economic expectations for this year?
A: Pre-pandemic, the Georgian economy was growing very rapidly. In 2019, GDP grew by an annual 5% and we expected the economy to continue on a growth trajectory. Eventually, the economy contracted by 6.2% in 2020, but we are very optimistic about the prospects of a recovery. In March the economy expanded by 4% year-on-year, which was the first growth since the pandemic began. We hope that due to the numerous structural reforms underway — and the massive privatisation of state property and support provided to SMEs — we will manage to grow by more than 4% in 2021.
In association with Invest in Georgia. Writing and editing were carried out independently by fDi Intelligence.