Georgia’s Anti-Crisis Economic Plan

The Georgian government introduced a massive anti-crisis plan. Amid a worsened economic situation in the country, the plan will serve as a test for the ruling party before the crucial parliamentary election in October 2020.

On April 24, Georgian Prime Minister Giorgi Gakharia introduced an anti-crisis plan which covers almost all sectors of the economy the country depends on, and which is subdivided into two large stages. Overall, the government plans to spend 3.5 billion GEL, roughly $1.2 bln.

The anti-crisis plan includes both financial assistance to those who have lost their jobs due to the lockdown caused by the coronavirus, as well as measures to navigate business from the shutdown within a six-step plan of gradual removal of imposed restrictions on economic activity.

According to the PM, the government will pay more than 1.2 million households’ electricity, water and cleaning bills, and 670 households’ natural gas. In total, the government will spend 150 million GEL (more than $45 mln) for this purpose. At the same time, the government also subsidized prices for 9 main products (bread, butter, etc.), spending 15 million GEL (roughly $4.5 mln). Moreover, 600,000 loans were allowed to be deferred for a consecutive three months.

A crucial sector which constitutes a large part of the Georgian economy is tourism. In 2020, up to 7 million tourists were expected in the country. Therefore, propping up the sector was important: the government annulled 4 months of property and income taxes for tourism-related business entities (until November 1). This benefits 4,500 entities to the amount of 90 million GEL ($29 mln). Small hotels opened with bank loans will receive state financing of 80% of the loans for the duration of a consecutive 6 months (an overall amount of 10 million GEL (nearly $3.3 mln). This measure will benefit nearly 850 hotels across the country.

Another 7000 legal entities are allowed to restructure their bank loans. The state has also insured the increase of the price of construction materials for all infrastructure projects allocating for this purpose to the amount of 200 million GEL (nearly $60 mln).

One of the crucial components of the anti-crisis plan is a minimal substitution of employee salaries to nearly 350,000 citizens. For the duration of 6 months, those who lost their jobs as a result of the measures imposed because of the pandemic, will receive 200 GEL (nearly $60) per month. The government will spend 460 million GEL (nearly $150 mln) for this purpose. Additionally, the government will also allocate 75 mln GEL ($24 mln) to subsidize a one-time salary to self-employed people. This specific proposition stirred numerous disagreements in the county as not all self-employed people would be able to prove they enjoyed steady salaries before the pandemic. As an additional measure, employers will be exempt from the 20% income tax for the duration of 6 months for salaries which amount to 750 GEL (nearly $235).

Socially vulnerable people, including large families, will receive 600 GEL (nearly $180) per month for the duration of 6 months. Persons with severe disabilities and children with disabilities will also receive assistance. The amount for this purpose will be 83 million GEL (nearly $27 mln.). Moreover, from 2021, the state pension will increase by at least 20 GEL (nearly $7) per month.

At the same time, the government also plans to provide the amount of 600 million GEL ($190 mln) to commercial banks, and an additional 500 million GEL will be generally allocated for business support.

Another crucial sector for the stability of the Georgian economy is agriculture, as the country must be able to meet domestic demand for food, particularly as neighboring countries (for example, Russia) have already started to cut down the existing supply chains. 40 million GEL (nearly $13 mln), plus another 50 million GEL ($16 mln) in agro-credit will be provided, benefitting nearly 5000 farmers.

The government also unveiled a 6-phase plan to gradual lift restrictions, with the 6th phase (entertainment, sports, recreational, gambling, hotels, educational institutions and all other activities) scheduled to start on July 5.

The anti-crisis plan will serve as a major test for the government, as the long-term forecast for the Georgian economy is not particularly satisfying: the country's economic growth will likely be reduced by 4%, meaning budget revenues will be reduced by 1.8 billion GEL ($580 mln).

Image source: guardian.ng