Georgia's research center reveals three scenarios of economic dev't

Business Materials 22 May 2020 17:11 (UTC +04:00)
Georgia's research center reveals three scenarios of economic dev't

BAKU, Azerbaijan, May 22

By Tamilla Mammadova – Trend:

The pandemic has sharply weakened Georgia’s economic growth prospects for 2020, Trend reports with reference to Georgia's PMC Research Center (PMC RC).

Severe containment measures are already significantly lowering tax revenues while state expenditures increase. Extreme uncertainty is also hampering capital inflows and delaying investments, as well as weakening domestic demand, the report said.

According to PMC Research Center’s recent assessment in which three scenarios (optimistic, less pessimistic, and very pessimistic) were considered, Georgia’s real economy is expected to shrink by 4.3 percent in the optimistic scenario, and by 8 percent and 12.9 percent in the less pessimistic and very pessimistic scenarios, respectively.

Due to the stagnation in economic activity, the budget revenues from taxes will inevitably fall.

Based on the three scenarios for economic growth in 2020, the center has estimated the magnitude of the decline by analyzing the impact on each type of tax separately. As a result, PMC RC estimates a decrease by 1.75 million lari ($548,382) in tax revenues in optimistic scenario, by 2.20 million lari ($689,394) for the less pessimistic scenario and by 2.84 million lari ($889,946) in the very pessimistic scenario.

As reported, planned budget spending should be reprioritized to provide space for coronavirus-related expenditure. The financing of emergency health and social needs is becoming more challenging, particularly considering the already high level of Georgia’ debt and the inevitable increase to its budget deficit due to the pandemic.

"The government should assess the resource requirements for health responses and support packages, and should identify and cut low-priority spending (current and capital) to create space and keep balance for emergency spending measures and post-crisis response. Meanwhile, the generation of additional revenue from privatization should also be considered," the report said.

The PMC Research Center said that effective public financial management is key to safeguarding against fiscal risks and enhancing the Georgia's government’s capacity to respond to the crisis.

The government should intensify the monitoring of revenues and expenditures as well as the national debt and liquidity position. Moreover, fiscal policy responses need to be adequately costed and monitored, the center concluded.


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