ADB President Reaffirms Support for Georgia's COVID-19 Response
By Natalia Kochiashvili
Friday, March 27
The Asian Development Bank (ADB) is contributing around $6.5 billion to address the urgent needs of developing countries, including Georgia, to facilitate their fight against the coronavirus pandemic.
ADB President Masatsugu Asakawa and Georgia’s Minister of Finance Ivane Machavariani yesterday held a discussion on how ADB can support Georgia amid the COVID-19 pandemic.
Asakawa reaffirmed ADB’s support to Georgia at this unprecedented time and assured that the bank is considering every option to provide assistance quickly and effectively. He also expressed readiness to work with the government and key partners on countercyclical support that will enable it to meet the needs of the people most affected. “Significant efforts are underway to assist the private sector,” ADB’s President said in a telephone conversation.
Machavariani expressed his gratitude for ADB’s ongoing support and for the organisation’s proactive communication with member countries.
Georgia is experiencing a dual shock from the direct impact of the pandemic and indirect effects of lower oil prices. The impact will be particularly severe on tourism and other services. Lower oil prices are negatively affecting remittances from neighboring countries and trade flows are weakening as growth slows in these countries.
The President of ADB emphasised that Georgia has been a leading reformer and this has positioned the country well to deliver its response to the pandemic, including through tax concessions to the hard-hit tourism industry, capital expenditures to provide economic stimulus, and expanding access to funding for micro, small, and medium-sized enterprises and private individuals that will enable Georgia to use resources effectively and lay the foundation for a quicker recovery.
Investment Bank Galt & Taggart has released an overview on the impact of the economic shock on Georgia due to the Coronavirus and global oil prices.
Galt & Taggart discusses 3 different scenarios of the magnitude of the impact on the Georgian economy by Covid19 - optimistic, intermediate and pessimistic scenarios. In the event of a pessimistic scenario, the bank predicts a recession and a 6% drop in GDP.
Under all 3 economic scenarios, Georgia's balance of payments will be under pressure, with an expected annual loss of $ 1.7 billion in the first scenario, $ 3.1 billion in the second scenario, and $ 4.4 billion in the fourth scenario.
The Investment Bank calls on the state to take active fiscal and monetary measures in the current situation. Anti-crisis plan short-term measures include: mitigation of regulations, distribution of social vouchers to the vulnerable population, simplification of banking regulations, halving property taxes, attracting foreign funding, revising / stopping business regulations, mitigation of financial conditions for banks, further simplification of banking regulations, equipping / strengthening hospitals, continue supporting strategically important sectors.
Galt & Taggart, like consulting firm Reformatics, are also calling for the state to suspend temporary pension contributions. Under the current pension model, 6% of every employee's salary is automatically transferred to the State Pension Fund, of which 2 % points are employee contributions, 2 % - employer contributions, and 2% are state contributions.
As for long-term arrangements, they recommend developing a new economic model in light of the changing world situation; using existing free trade regimes, encouraging sectors where we have potential for production, both for the domestic market and for export, attracting foreign investment and implementing fundamental reform of the education sector with active involvement of the private sector.
