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Georgia and the crisis: who will win out?2008-12-31 15:05
Georgia's government has devised its strategy for coping with the economic crisis, which involves stimulating the economy and implementing a social aid programme.
2.2 billion lari are intended to be spent on stimulating the economy to stave off the negative consequences of the crisis. 1.6 billion lari has been allocated for a social aid programme aimed at the socially disadvantaged sections of the population.
At the same time the government's decision to cut income tax and taxes on dividends, as well as its promise to raise salaries for teachers by 50 lari and pensions by 10 lari as of next year, remain intact.
On the backdrop of President Mikheil Saakashvili's optimistic declarations that Georgia will cope well with the international financial and economic crisis, will save its economy and banking sector, will continue to create new jobs and in just six months will follow Europe out of the crisis in a stronger position, negative trends are emerging in Georgia's economy.
The "Bank of Georgia" has already reported that more than 800 employees will be made redundant because of the closure of its immediate loans and foreign sales services. TBC Bank has made about 300 employees redundant. Mass lay-offs have begun in the joint stock company Chiaturmarganets. In construction firms workers have not had their salaries paid for several months.
The expert Gia Khukhashvili, assessing the anti-crisis strategy of the government, noted that the package of bills presented by the government is only superficial and gives rise to many questions.
"I don't wish anything bad on my country, but I am sceptical, since the systemic changes in the economy mean that these plans will just vanish into thin air, in the same way as many other packages, which were put together in conditions far from resembling the upcoming crisis, still remain unrealised."
According to him, the government's plans and efforts are merely half-measures which may halt the development of the crisis for a time, but will not help to overcome it.
"I don't understand what infrastructure projects have to do with stimulating the economy or the social package. But the strategy put forward by the government talks of investment to local infrastructure projects. And there is another thing: the government claims that by cutting income tax it will put 250 million lari back into the economy. It would be interesting to know how it intends to do this. Or is the government using this to send a signal to employers that they can cut wages for their workers? This strategy gives rise to a lot of questions, but no answers are being given," noted Gia Khukhashvili.
He stressed that the problem is not the size of the financial stimulus planned for the economy, but that the economy needs to actually work, and in Georgia this trend cannot yet be seen.
"The measures being undertaken are merely an attempt to temporarily postpone any large risks, but these risks will sooner or later make themselves felt," said the expert.
Gia Khukhashvili calls the government's claims that during the economic crisis new jobs will continue to be created an "economic absurdity" and says that it is not the government's responsibility to create new jobs.
"The government should concern itself with creating the conditions where business and the economy can develop, and then business itself will create new jobs. For the time being job losses are inevitable, and this is already being felt," remarked the expert.