The Service-oriented Economy is Unable to Attain Inclusive Growth – Experts about the Economy Minister’s Statement
The government of Georgia will enhance economic stability and maintain inclusive economic growth, thanks to an appropriate fiscal policy and core structural reforms, Economy Minister Natia Turnava noted at a meeting with members of the International Monetary Fund (IMF) mission.
For many years, the authorities have kept assuring us that inclusive economic growth is a top priority in our country. Put on the agenda in 2014, inclusive growth ideas were included in the social and economic development strategy of Georgia.
“The steps that our team has taken have proven our aspirations for inclusive growth. More than 26,000 farmers have enjoyed the benefits of the initiative that we have implemented in the agricultural field. More than 1 billion GEL was invested in agriculture. This means that the authorities have engaged in lobbying major companies, but promoting small and medium businesses. This means the authorities aspire to make the economy inclusive”, the former Prime Minister of Georgia Bidzina Ivanishvili said.
As noted by economic expert Soso Archvadze, a positive trend of economic growth and resistance to economic shocks, as well as the potential for overcoming these shocks, and dramatic growth in external trade and the decision to narrow trade and payment balance deficit were correctly appraised by the International Monetary Fund (IMF).
Correspondingly, attaining highly inclusive economic growth is the key challenge in 2020. The Georgian economy, the Georgian authorities, business sector and, in general, society have the potential to achieve this goal, he added.
As noted by AYFB analyst Paata Bairakhtari, various economic teams and Prime Ministers have failed to attain inclusive growth. The service-oriented economy cannot ensure inclusive economic growth, Paata Bairakhtari said.
“Our economic structure has generated major problems. The service-oriented economy isn’t expected to achieve inclusive economic growth; even more so, considering the current reality of the situation in our country. The tourism industry is assigned to act as the locomotive engine of the economy , while 70% of incomes from this industry is pumped out from the country because of various challenges, and it is impossible to ensure inclusive economic growth in a similar situation. It is impossible to improve this situation through structural and fiscal changes. We should just fundamentally revise economic policy, because the rate of economic growth is below 5%, and inclusive growth cannot be achieved. The government’s economic vision is folly. The areas that we have determined to be engines of economic growth serve only as secondary sectors in many other countries. For example, we have determined that the tourism industry is an engine of our economy, while incomes from this industry are drained from the country, because nothing is produced in Georgia – this is the major problem. Inclusive growth has become the challenge that many economic teams and the Prime Minister failed to overcome”, Paata Bairakhtari said.
Economic expert Zviad Khorguashvili believes that the current pace of economic growth paces cannot ensure inclusive growth. This is just a new phrase that, several years ago, Georgian Dream introduced for domestic use, he said.
“We do not have a promising reality in terms of the fiscal and macroeconomic indicators. Economic growth is one simple criterion in this regard, and we have very low indicators. Boasting of 5% growth in a poor country like Georgia, that remains out of the list of the top 100 countries in terms of per capita wealth, is just an illusion. Furthermore, the debt-to-GDP correlation has dramatically increased over the past few years. We have a similar situation in terms of a deficit that is expected to beat the previous record in 2020. The same trends are seen in every other macroeconomic indicator. Furthermore, the authorities are permanently raising the tax burden. Every macroeconomic parameter worsen year to year, and boasting of this reality is a serious mistake. Inclusive growth is a phrase introduced by the Georgian Dream party. Under this phrase, they imply the equal development of various economic sectors and various regions of the country. Inclusive growth cannot be achieved without normal economic growth. I think they have just introduced a new word to look very development-oriented and advanced. Only with a rate of 12% or 10% economic growth, could we mull over how this or that region, or various economic sectors are developed”, Zviad Khorguashvili noted.
It is noteworthy that under the 2020 social and economic development strategy, the Georgian government makes economic growth a top priority; however, the strategy does not specify how we should achieve inclusive economic growth.