2020 December-January Analysis

Rebound: How Georgia can learn from the pandemic and build a more resilient economy

An interview with USAID Economic Governance Program Chief of Party Natalia Beruashvili

Before the onset of the coronavirus pandemic, the Georgian economy had been on its way to a bumper year: tourism numbers were high, trade was up, and planned public investment was robust.

But by March, it was clear the virus was infecting every aspect of the economy, especially the vulnerable sectors of tourism and hospitality. Other areas were also looking grim.

As the impact on the economy grew, the Georgian government asked the USAID Economic Governance Program to help devise a recovery plan to mitigate the effects of the pandemic.

“The Government of Georgia asked for the Program’s support in designing post-COVID-19 economic recovery measures. In response, the Program engaged a team of international economic experts to help develop the economic recovery plan,” noted Natalia Beruashvili, who heads the USAID Economic Governance Program.

The experts were recommended by Deloitte Consulting Overseas Projects LLC, implementer of the USAID Economic Governance Program, and were agreed upon with the Prime Minister’s Office.

The team studied data from before and during the pandemic, including the impact of the lockdown and the potential consequences of increased public borrowing to fund emergency assistance, writing in their report: “Georgia entered the pandemic in a strong position, backed by an effective reform agenda, strong international rankings, a steady growth trajectory, and sustainable fiscal accounts. Its central bank enacted sound monetary policy, and effective inflation targeting and structural reform to the financial sector.”

Based on their analysis, the experts detailed recommendations for the necessary steps to foster rapid recovery.

The recommendations run the gamut of economic and finance policy making, including innovative ideas for how Georgia can use the pandemic and post-pandemic periods to improve workforce education and accelerate digitalization efforts. This includes the acceleration of the private sector’s adoption of digital tools and business models.

The report underscored the need to accelerate capital markets reform, already a priority area for the Program, and to use the pandemic period to ensure workers receive the training they need to transition from low-earning work to more skilled professions.

The experts noted that several existing trends highlight the need for the government to prioritize “swift, bold investments in digitalization, workforce development, and core infrastructure.”

“COVID-19 has created new opportunities for Georgia to stimulate its economic recovery and long-term resilience through deepening integration with global supply chains,” the experts wrote.

“To capitalize, Georgia must focus the next phase of policy on positioning high-potential sectors to compete—high-value/low-volume manufacturing segments and select business services—and creating and enabling environments for local businesses to adapt.”

“Invest in alternative training and expand on-the-job upskilling as well as deeper employer engagement in workforce development,” the report recommended, adding that the government should evaluate business interest in alternative training programs such as apprenticeships, termed subsidies for new hires, and funding for training.

The experts also focused on the need to accelerate the digitalization process in the country.

“Support demand-side development through an incentives program enabling digital upgrades for business including access to financing and consultancy services, as well as incentives to encourage participation in ICT-related training,” the report stated.

Action to aid recovery

The USAID Economic Governance Program is already working on several reforms and initiatives that follow the experts’ recommendations and address hard-hit sectors.

For instance, the Program’s work on capital markets reform—including the new Investment Funds Law and support for the reform of the Foreign Exchange and money markets—aligns with the experts’ recommendation to enable business investment. It also reinforces the recommendation that the government and the NBG should continue measures to facilitate the broadening and deepening of capital markets for lari-denominated financial assets.

“The Program’s support for insolvency reform underscores the experts’ recommendation to enable the recycling of valuable assets back into the economy,” Beruashvili said. “In addition, the Program’s work to support the e-commerce policy development reinforces the recommendation to support and accelerate digitalization in the economy.”

A Think Tank Consultative Group was created as a platform that brings together economic analysts and government officials to discuss the policy reform process. The platform encourages dialogue on the implications of different policy options before reforms are initiated, resulting in improved policy outcomes.

Helping business associations and civil society organizations become more sustainable and better able to advocate for the needs of their members has also been a part of the Program’s work.

“The Program provided technical assistance to help several tourism industry-based associations create an alliance to advocate for the reforms and policies needed to save the industry following the pandemic,” Beruashvili said.

The Program is working closely with civil society organizations, in particular those devoted to helping women and the youth, emphasizing sustainability. One of its main goals is to promote women and youth empowerment through education. The Program developed an online summer school for university students devoted to enhancing young people’s knowledge about ongoing economic reforms, advocacy, and lawmaking, encouraging students to participate in public-private dialogue about economic reforms.

In addition, a collaboration with the Georgian Women Auditors and Lawyers Association has been launched to raise awareness among women about economic issues and to encourage participation in advocacy activities to increase the role of women in economic policy planning and implementation.

“CSOs [civil-society organizations] should play a powerful role supporting and advocating for their target audiences, including women. The Program is helping CSOs obtain the skills and training they need to help women and young people more actively participate in policy-making processes, and better understand how policy affects their lives,” Beruashvili said.

“The pandemic has highlighted the vulnerabilities in Georgia’s economy. It has also underscored the need for a systemic approach to analyze and address challenges to sustainable growth—and engage those who are most affected. Our Program is working closely with the government and private sector to help develop business-friendly, sustainable solutions that will help the Georgian economy emerge stronger from the crisis.”

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