The World Bank and the Government of Georgia hosted an event on 6 December that launched the World Bank’s Country Economic Memorandum (CEM) on ‘Charting Georgia’s Future: Competitive, Connected, and Capable.’
The CEM is a growth diagnostic report prepared by the World Bank to analyze drivers of growth and provide recommendations. Per the World Bank’s press release, the report depicts Georgia’s “significant development gains over the last decade and seeks to inform government policies and help facilitate similar successes over the next 10 years.”
Per the same information, the CEM “features the story of a small, open, and resilient economy that has made considerable progress in GDP growth and poverty reduction, yet with more limited success in improving productivity and creating well-paying jobs.”
The report highlights that Georgia has overseen a successful economic expansion in the last decade, notwithstanding the COVID-19 pandemic. Noting that Georgia has a “sound macroeconomic framework, an attractive business environment and improving governance,” the report emphasized that “this made Georgia one of the fastest growing economies in the Europe and Central Asia (ECA) region.”
In line with those findings, the report pointed out that Georgia has moved to upper-middle income country (UMIC) status, and the poverty rate declined from 37.3% to 19.5% at the start of the decade.
Regarding COVID-19, while the report noted that the pandemic disrupted such trends, it nevertheless emphasized that the “government’s large and timely pandemic response kept the increase in the poverty rate to only 1.8 percentage points and facilitated one of the fastest recoveries in the region in 2021…”
Still, the report lamented that “the pandemic’s impact on employment, income, and human capital is likely to persist for some time.”
In that sense, the report noted that “despite the country’s strong foundations for growth, continued success in the next decade is not guaranteed.”
“Some constraints are already binding: investments may need to moderate to stabilize debt accumulation, skills are an acute problem or firm growth and the population is aging,” the report remarked while emphasizing that “other constraints will become increasingly more binding.”
In that context, it underlined that while the Georgian economy’s ongoing structural transformation from agriculture to services is “delivering gains […] its potency will gradually diminish.” “Moreover, Georgian firms have not improved their efficiency, which has meant that, despite strong GDP growth, the creation of good jobs was underwhelming keeping many Georgians unemployed,” the report added.
It also pointed out that even those Georgians that transitioned out of agriculture are doing only “slightly better” than their counterparts who have continued to work in agriculture since many of them are either self-employed or in low-wage jobs.
The report also stressed that Georgia “faces an uncertain global environment that is rapidly changing,” while highlighting that the Russian invasion of Ukraine is “the third largest shock to affect the Georgian economy in less than four years, following the unilateral ban on flights from Russia in 2019, and the COVID-19 pandemic during 2020 and 2021.”
In line with its findings, the Memorandum recommends that Georgia could maximize its growth potential by:
- Facilitating ongoing structural and spatial transformations;
- improving productivity performance at the sector – and firm – level;
- increasing connectivity and external trade;
- and building up and better utilizing human resources.
- 19/10/2022 – Georgia in World Bank’s Human Capital Review