Government Pledges to Keep 14% Unemployment

Nika Gilauri, the Finance Minister, told lawmakers on December 30, that the government’s efforts were directed towards maintaining the current level of unemployment next year, about 13-14%.

“Unemployment this year and in previous years stood at 13-14%,” Gilauri, who also holds the post of first vice premier, said. “We expect to maintain that level of unemployment next year, although it will be hard to achieve… Our efforts are directed towards creation of workplaces in other sectors of economy to balance expected job cuts in banking, construction and real estate sectors.”

He said that for that purpose the government had elaborated, what he called, “an economy stimulus package.” The proposal is part of the draft 2009 state budget, which was presented by the Finance Minister to the Parliament on December 30 and which was passed by the Parliament in the evening on the same day.

“The government can not intervene in the private sector dictating businesses to hire this or that number of people. What we are doing is reducing taxes and planning to spend GEL 2.2 billion on infrastructure development projects. Tenders will be announced next year to implement these projects and the Georgian companies will be contracted for implementation of these projects. That’s maximum what the state can do,” Gilauri told lawmakers.

During the debates, the Finance Minister was pressed by the lawmakers from the parliamentary minority, in particular by MPs from Christian-Democratic Party, to specify an exact figure, which the government expected swing in unemployment.

Finance Minister Gilauri, however, was repeating in response that the government was trying to maintain the current 14% unemployment level. “It is impossible to make an exact forecast how many jobs will be lost on daily and monthly basis. I am repeating once again that our efforts are aimed at maintaining 14% unemployment next year,” he added.

A need assessment report, drafted by a World Bank-led team for the donors’ conference, which was held in October in Brussels, estimated that unemployment was expected to increase in Georgia in near-term by 100,000, reaching 350,000, which is one-fifth of the total labor force. The trend, it said, would “be a blow to poverty reduction.”

Preliminary estimates indicate, according to the report, that unemployment would increase from 13.3% in 2007 to 15.1% by 2010 and poverty levels are estimated to increase from the current 23.6% to 25.9% in next two years.

It also said that the construction, real estate, retail and tourism sectors have been particularly badly hit after the August war and global financial crisis.

According to the same report, the government has requested donor countries to increase work permit quotas for Georgians. “If quotas for about 100,000 workers were to be granted, economic and social pressures would abate greatly,” the need assessment report reads.

A lawmaker from the ruling party, Zurab Melikishvili, who chairs the parliamentary committee for finances, said during the debates on December 30, that the next year “will be the year of rescuing the workplaces.”

Finance Minister, Nika Gilauri, also told lawmakers that the economic growth forecast in the final draft 2009 state budget was revised from 4% in initial draft to 2.5%. He said that the government expected 2% economic growth by the end of this year.

Gilauri also said that the National Bank’s assessment predicted that Georgia would receive USD 1.7 billion foreign direct investment in 2009.

The parliamentary minority has slammed the proposed draft budget and said it would not support it.

“There is lack of consistency in the government’s economic policy,” MP Giorgi Targamadze, leader of the Christian-Democratic Party, said. “As a result of the [head of government’s administration and former state minister for economic reforms Kakha] Bendukidze’s policy we have received Georgia with poverty, instead of Georgia without poverty” – a reference to the ruling party’s pre-election slogan.

He said that his party welcomed planned reduction of income tax from the current 25% to 20% next year, but also added it would not have enough positive effect on the economy. The government said GEL 250 million will be left in the economy as a result of the planned tax cut.

“We are offering to reduce value added tax from the current 18% to 15%; it will have much more positive effect on the economy rather than reducing income tax,” MP Giorgi Targamadze said.

He also said that his party was proposing restoration of the anti-monopoly agency; the parliamentary oversight over the statistic department and constitutional amendment that would remove a provision from the constitution allowing restricting private property ownership right “for the purpose of the pressing social need.”