The Challenges of Building a Modern Georgian Economy – International Monetary Fund

June 12, 2017

Thanks, Mr. Sharvashidze, to your type introduction. It's an honor to go to Georgia. And it's an honor to have the ability to spend time at present at Tbilisi State College

Mr. Governor, Mr. Minister, you will need to come collectively to debate the challenges of constructing a fashionable Georgian financial system. I all the time take nice pleasure assembly with college students throughout my work. This group represents Georgia’s future and may have a voice in at present’s dialogue.

Your nation has made nice financial progress since reaching independence, and up to date reforms have laid the muse for continued advances.

I believe there's broad settlement on the problems to be addressed if Georgia is to realize the sustained financial development that can profit all Georgians.

It gained’t be lengthy earlier than many of these challenges relaxation in your shoulders. If you depart college, you can be taking up tasks that, in time, will assist decide your nation’s future.

So, I wish to define some of these points at present.

Let me start with a transient overview of the worldwide financial system since that can all the time have such an necessary bearing in your nation’s prospects. Then I will flip to Georgia’s latest financial efficiency, earlier than trying to the future.

International and Regional Outlook

The IMF not too long ago upgraded its forecast for world development to three.5 % this 12 months and three.6 % in 2018. That's up from three. % in 2016.

We're seeing stronger development within the U.S., Europe and Japan, after nearly a decade of disappointing development. Rising market and growing international locations are also experiencing extra strong development, with commodity costs recovering after the sharp downturn of 2015. Russia is exhibiting indicators of rebounding from its recession.

Among the many fast international dangers, the U.S. Federal Reserve continues to increase rates of interest at a regular tempo. This raises the likelihood of tighter monetary circumstances and even potential market volatility. This requires vigilance by Caucasus international locations which might be extra open financially.

One other challenge is uncertainty about China’s financial rebalancing effort. Beijing’s shift towards home demand as main supply of development, and its makes an attempt to strengthen China’s monetary system, will likely be good for China and the world alike in the long term. However the course of is so complicated and never with out dangers. We noticed this within the 2015 monetary market volatility that hit international markets, for instance.

On this half of the world, the Caucasus are seeing a fragile restoration after final 12 months’s slowdown. General, there's a legacy of public debt and weak monetary techniques. It will be important that governments deal with these points.

The IMF initiatives that Georgia will develop about three.5 % this 12 months, up from a median of 2.eight % over the previous two years. That is largely supported by funding and personal consumption.

Within the medium time period, we see Georgia returning to the 5.5 % development after the latest downturn. However that can rely on the continuation of latest insurance policies which have created favorable circumstances for personal funding, productiveness development, and larger export competitiveness. The surroundings for doing enterprise can be enhancing—because the World Financial institution not too long ago said.

Georgia’s Challenges

What are some of the important thing challenges going through Georgia? Let me spotlight three:

First, is the slim export base. Conventional agriculture and established industries corresponding to metals is not going to be sufficient to assist Georgia’s exports in a quickly altering international financial system. New sectors are rising, particularly tourism and transportation. However you might be competing in opposition to international locations that are pursuing the identical purpose.

Current free commerce agreements ought to assist to spice up financial diversification by opening new markets. However that alone gained’t be sufficient. Mobilizing home financial savings to spice up funding will even be necessary to assist extra balanced development.

The second problem is within the job market, the place unemployment and below-employment stay at excessive ranges. Virtually half of your nation’s labor pressure is engaged in agriculture. Too many individuals are counted among the many lengthy-time period unemployed.

This downside contributes to the extensive inequality in Georgian society. Additional reforms are wanted to advertise extra inclusive development.

Because the financial system continues to evolve, this downside will change into extra difficult.

What's required is a severe authorities effort, maybe together with improved job-search and job-matching providers.

As well as, the social security internet must be preserved to guard the poor, the aged, and susceptible. This contains those that are in danger of falling behind as a result of of structural adjustments within the financial system.

Georgia within the New Economy

The employment challenge additionally highlights the third problem your nation faces: a severe mismatch of abilities within the job market.

Let’s take a step again to have a look at this downside. The world of work is altering at lightning pace. Expertise is evolving, and new enterprise fashions are rising.

New job abilities are in excessive demand. That signifies that colleges should be capable of domesticate the labor pressure of the long run in each nation. It additionally means that the office should be continually upgraded to fulfill the calls for of innovation.

Georgia can be going through this problem—as I’m certain many of you realize very properly. Georgian corporations which might be making an attempt to make it within the new financial system say their largest impediment to development is discovering employees with the suitable ability set.

What is required is a continued effort to construct up an academic system that may also help meet this demand. This requires enhancing the standard of main and secondary schooling, together with the introduction of vocational coaching. It additionally may contain setting curriculum and trainer efficiency requirements.

Improved schooling additionally means extra college students going to school to obtain levels aligned with the wants of the brand new financial system. And it means a properly-developed grownup studying program.

Conclusion

In conclusion, your technology will likely be known as upon to combine Georgia into the worldwide financial system in ways in which we are able to barely think about at present. You'll face the challenges of worldwide integration and competitors.

You'll play a key position in constructing Georgia’s future. Some of you can be change into enterprise leaders. Some will be part of the federal government. (Perhaps a few of you will change into economists on the IMF.)

No matter you find yourself doing, know that you'll have nice tasks to your countrymen who haven't had the identical alternatives you now get pleasure from. Use these alternatives correctly. Thanks!

IMF Communications Division
MEDIA RELATIONS

PRESS OFFICER: Randa Mohamed Elnagar

Cellphone: + 202 623-7100E-mail: MEDIA@IMF.org

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The Challenges of Building a Modern Georgian Economy - International Monetary Fund