Georgia was one of the richest former Soviet republics due to its privileges such as geographical location and favorable climate, advanced agriculture, mining, industry, and tourism. But the collapse of the Soviet Union and the outbreak of civil wars, and the decline in overall output, plunged the economy of newly independent Georgia into crisis. Meanwhile, in the past decade, the efforts and policies of the government in this country have caused the country's economy to experience a special boom. (Photo quoted from Yahoo’s image)
Therefore, economic reconstruction, and privatization, convergence with the EU economy, and tourism development became the main priorities of this country. According to global statistics, Georgia gained a good rank in terms of trade simplicity, reform, economic freedom, and the fight against corruption in the region and the world.
However, in 2020, due to COVID-19 pandemic, Georgia faced with a reduction of its GDP, increase in the budget deficit and foreign debt, decrease in tourists, current account deficit to more than 10%, decrease in the value of Georgian lari (GEL), decrease of exports, increased donations from foreign donors to control the exchange rate and control inflationary challenges.
However, in looking at the future of the country's economy, the role of various factors is prominent. The government believes that despite relatively predictable conditions and low risk of profits, with a commitment to the reform process, a high degree of trade freedom, the least bureaucracy in 2021, and rapid economic recovery will occur and the region will be a leader in 2021-24.
Therefore, despite the serious damage to the tourism sector (44% reduction in the number of tourists), it may strengthen flexibility in the face of crisis by shifting the priority of the country's economy from the tourism industry to agricultural and port-based industries and shipping.
Also, between 2016 and 2018, the number of foreign tourists increased by one-third, and in 2019, Georgia earned about $ 3 billion from tourism (20% of GDP). But recently, countries like Georgia, which relied heavily on the tourism industry, have suffered the most. Therefore, the revival of Georgia's economy depends on the revival of the country's tourism industry.
Even now, however, a rapid resumption of the global tourism industry could offset the damage done to Georgia's economy. But tourism for 2021 is completely uncertain. The tourism industry will not be able to return to its previous position until the outbreak of the coronavirus in the world is prevented.
On the other hand, it is predicted that domestic demand and increase of foreign direct investment will lead to economic recovery. This can prevent rising food prices, problems with loans and savings for citizens, and rising unemployment.
Also, the government seems to have changed its approach. Therefore, if the government succeeds in increasing the value of the lari against the dollar and reducing foreign debt, it can achieve positive economic growth in 2021 by getting out of the negative economic growth rate of 6.1 percent.
Meanwhile, although the Georgian government has approved an anti-crisis plan and begun work on a 10-year development plan for the country, this requires effective government management, active foreign policy, and strengthening cooperation with business partners, strengthening the tourism sector, exports and investment.
Farzad Ramezani Bonesh
Senior Researcher and Analyst of International Affairs
