Some outcomes of financial crisis

Some economic experts say that the peak of the economic crisis will be at the end of March. Analyst Revaz Sakevarishvili however thinks that the downturn is not yet finished. “Financial crises and economic changes are determined by local as well as global factors. Therefore it is difficult to determine when the peak of the crisis will be in Georgia,” stated Sakevarishvili.

Today the country is experiencing an investment drought. Transfers from foreign countries have decreased dramatically, the construction business is suffering a lot and indirectly these factors influence the banking sector. The scheduled April 9 rallies add so-called political risks. Therefore it is pretty difficult to tell when the crisis will reach its peak in Georgia.

Official figures however try to present an optimistic picture. During yesterday’s meeting with representatives of the American Chamber of Commerce in Georgia PM Nika Gilauri tried to reassure the businessmen that things are not as bad as they might have been. The figures for the first two months of this year, according to the segmented analysis he presented, show that although there has been a clear decline since 2008 the major economic indicators are still comparable with those of 2007.

Economic experts are nevertheless quite cautious and don’t share the Government’s optimism. Figures are one thing, but the number of people who have lost their jobs and now cannot pay back their bank loans and have fallen into a desperate situation is another.

Independent economic analysts think that a budget cut could be needed. The Ministry of Finance however categorically denies the possibility of a budget cut. Deputy Minister Papuna Petriashvili assures the population that there is no deficit in the budget and it will be fulfilled 100%. According to him budget expenditures will not decrease so talking about the possibility of cutting the budget is absurd. The question is, if the budget will still have to be cut at the end of year, will the Finance Ministry take the responsibility for doing it?

Meanwhile available information shows that the country had accumulated a huge foreign debt of over USD 7 billion by December 31 2008. Of the total debt of USD 7.302 billion, USD 2.260 billion is Government sector debt. USD 460 million is NBG debt, USD 1. 874 billion banking sector debt, USD 778 million other sector debt and USD 1. 948 billion intercompany debt.

Economic analyst Davit Narmania thinks that the country takes on foreign debt mostly to cover budget deficit. He thinks that taking on a debt of EURO 500 million to issuing euro bonds with was a wrong step. The Government however assures us that foreign debts are the sources for the rehabilitation of infrastructure and for the development of vitally important projects in the country. So again, if things go OK people will believe in the country as their wellbeing improves. But if something goes wrong, who will take responsibility?