Georgia Looking to Make Swift Economic Comebacks Despite Being Hit Hard by COVID-19 -Diplomat Magazine

The economic impacts of the COVID-19 pandemic have been very tough for world governments. Georgia’s small and open economy was on a positive trajectory before COVID-19 happened and brought its growing strength to zero point. Diplomat spoke to Natia Turnava, Georgia’s Minister of Economy and Sustainable Development, about Georgia’s response on the economic front.

Ms. Turnava shared a great deal of optimism about Georgia’s ability to make a swift recovery from the harsh effects of COVID-19 due to what she describes as Georgia’s institutional strength, and resilience to significant economic and financial shocks in the past. She also shared Georgia’s economic response plans, the role of international support, and the plan to rescue Georgian tourism with us.

What do you expect to be the economic impact due to coronavirus?

The world has changed dramatically as a result of the COVID-19 pandemic. The economic crisis driven by the pandemic is like no other and is characterized with continued severe uncertainty, which is major challenge faced by the global economy and of course, by Georgia.

Georgia is small and open economy, whose positive economic trajectory has been interrupted by the crisis through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions and health effects.

Due to the pandemic we expect a sharp contraction in economic activity during 2020, followed by a gradual recovery. According to IMF Growth is projected at -4 percent in 2020, followed by a rebound to 4 percent in 2021, as tourism and external demand gradually recover after the COVID-19 pandemic.

Even though we clearly see scale our economy was effected, we are optimistic, as Georgia’s economy has proved institutional strength, macroeconomic stability and resilience to significant economic and financial shocks over past few years. As a result of adequate and successful economic policy, Georgia maintained macroeconomic resilience and comparatively high growth rates in recent years, even in a challenging external environment.

What is the economic policy for the response to the COVID-19 pandemic in Georgia?

We responded to the COVID-19 outbreak in various ways and tried to mitigate negative economic impact of the Pandemic. Our first line of defense against these considerable risks is our commitment to sound macroeconomic and financial policies.

As for the anti-crises actions, significant measures were already taken to minimize economic costs, support business sector activity, and vulnerable groups of the society.

The government introduced economic support package that includes various fiscal, monetary, financial, structural, social and business support measures, which will support private sector and improve social safety nets. The initial support measures included the postponement of property and income taxes for tourism and related sectors, delay bank loan payments for entrepreneurs and citizens for 3 months, provision of interest subsidy to small and medium sized hotels. Besides, government fully covered utility payments for three months for vulnerable households.

Afterwards Government presented more targeted and comprehensive economic support package with needed activities to strengthen social safety nets.

The second phase of social support measures envisages: provision of targeted social assistance to employed people who lost their job or were placed on an unpaid leave over the course of 6 months; one-time assistance to self-employed or employed in “informal sector”. Besides, State subsidy will be provided to businesses for each maintained workplace by exempting them from income tax (on salaries up to 1500 Gel) for 6 months. As well, the government has presented specific recovery plans in tourism, agricultural and construction sector that comprises targeted assistance in these sectors.

Under the framework of economic support package, state support programs became more targeted and oriented at most vulnerable and affected economic sectors, including tourism sector. State support programs such as: Micro and small business grants program, “Produce in Georgia” and credit guarantee scheme were re-designed, in order to ease pressure from the crisis on business sector and society and respond to the current and post crisis needs of businesses.

In order to address the challenges related to COVID-19 outbreak, together with above mentioned policy measures we are trying to utilize new opportunities currently unfolding globally, which will serve as precondition for swift post crisis economic recovery. Considering Georgia’s strong points, we will be aligning our new strategy to target sectors were we can provide a competitive and interesting propositions to investors.

The current favorable epidemiological situation gave us possibility to open up economy relatively faster, according to announced plan and strengthen our competitiveness on the global arena.

Last but not least, I would like to emphasize that implemented and planed economic support measures and realization of structural reforms, promises swift post crisis recovery. Medium-term growth projections remain unchanged owing to the steadfast implementation of our structural reforms, infrastructure investment and adequate fiscal and monetary policy and efficient measures oriented on private sector recovery.

How do you assess international support toward Georgia and what is the place of international cooperation in the context of the COVID-19 crisis?

It should be noted that Georgia was the first country to receive increased funding from the International Monetary Fund (under existing program) during COVID-19 pandemic. As a result, about $200 million was available immediately to the budget to help Georgia cope with the pandemic. As IMF mentions, Georgian authorities have taken decisive steps to contain the virus outbreak and limit its economic impact. The strong relationship and successful experience with development partners has helped the government swiftly secure financing to meet its increased financial needs. Successful negotiations with the IMF have allowed government to attract significant resources from other donors. As a result, more than $1.5 billion was secured as budget assistance until end of the year. The assistance includes funding from several IFI’s including IMF, ADB, WB, AFD, KfW, EU and AIIB.

Georgia’s cooperation with donors can be considered as a success story and example of solid and outcome oriented co-operation. Most importantly, our visions and priorities for prudent macroeconomic and economic development policies coincide. Besides, we are committed to continue the implementation of structural reforms that increases our policy credibility among donors.

You held several virtual meetings with your counterparts in Israel, the Baltic States, Czech Republic, etc., please tell us more about these negotiations.

“Georgia -safe tourist destination” is the main message which is delivered to partner countries. We are proud to reach a significant success amid the spread of the novel Coronavirus, which placed Georgia among one of the first countries to open its tourism market for domestic and international travelers, receiving foreign tourists starting from July 1st, 2020.

Reopening of the borders is essential for the economic and cultural development as well as for the promotion of people-to-people ties in this regard tourism could play a key role for further recovery. The main priority is to ensure a safe tourism exchange alongside the provision of high-quality tourism services. Georgia aims to resume tourism based on mandatory norms and regulations of WHO, UNWTO, and other relevant organizations by introducing a Mandatory Safety Guidelines for the tourism industry in Georgia.

The implementation of the above standards will ensure both the safety of international visitors as well as the local population. With this, Georgia conducts successful negotiations with the partner countries on the creation of “safe corridors” which implies mutual reopening of the borders based on the epidemiological situation.

It should be highlighted that Georgia appears among the top safest countries for some important source markets as Czech Republic, Israel, Greece, Austria, the Baltic States, etc. Furthermore, it deserves a special mention that the UN world Tourism Organization expressed its support and trust toward Georgia, and made a decision to hold the 112th Session of its Executive Council in Tbilisi in mid-September 2020. The event will reinforce the worldwide image of Georgia as a safe and attractive tourism destination.

Tourism is considered one of the hardest hits area by the COVID-19 outbreak. The sector is experiencing a rapid and sharp drop in demand. What is the immediate strategy in place to rescue Georgian Tourism?

Tourism represents one of the most affected industries by the novel coronavirus outbreak, and Georgia is not an exception in this regard. Herewith, the Government in close cooperation with the private sector elaborated a recovery program, including economic stimulus packages and tax exemption to confront the negative impact of COVID-19 on Georgia’s recently booming tourism industry.

Relatively low COVID-19 numbers allowed us to restart domestic and international tourism implementing mandatory safety guidelines for the whole tourism sector, including hotels, restaurants, transport, travel companies, and guides. Herewith special training programs will be organized for the representatives of the industry to support the implementation of the mentioned guidelines to ensure unimpeded service provision. The country known for its ancient hospitality traditions will attempt to appeal to tourists by introducing outdoor activities and products such as health and medical tourism, eco and agro-tourism, adventure tourism, national parks, etc.