How can Georgia boost economic resilience?
Advice from IMF managing director to Georgian policymakers

  • Christine Lagarde met this morning students in Tbilisi, where she talked about how Georgia can boost economic resilience, jobs, and living standards. Photo:Christine Lagarde/Twitter., 20 May 2019 - 12:10, Tbilisi,Georgia

Georgia is hosting Christine Lagarde, Managing Director of the International Monetary Fund (IMF), who is paying her first visit to the country on May 19-20, planning to meet local authorities.

Together with the Governor of the National Bank of Georgia (NBG) Koba Gvenetadze, Lagarde met this morning students in Georgia’s capital city of Tbilisi, where she talked about how Georgia can boost economic resilience, jobs, and living standards.

The longer-term goal is to catch up to living standards in Europe—to unlock the full potential of Georgians, young and old, rich and poor, here in Tbilisi and across the country”, said Lagarde.

  • Read the whole speech here.

Boosting Economic Resilience

Lagarde highlighted developments that Georgia has recently experience in reducing poverty level, increasing life expectancy, tripling real per capita income.

Fiscal deficits are contained; inflation is subdued, banks are well-capitalised, and the unemployment rate has reached a 15-year low”, Lagarde said.

However, she also stated that Georgia’s economy remains vulnerable to potential shocks, especially from escalating trade tensions and financial market volatility.

Policymakers can guard against these risks in a comprehensive manner: from maintaining exchange rate flexibility, to further increasing foreign exchange reserves, to implementing prudent economic and financial policies”, Lagarde said.

Lagarde said that there is room to further reduce the amount of loans and deposits denominated in US dollars. She recommended that Georgia should develop a local capital market and promote institutional investors who could support demand for long-term, local-currency bonds and other financial assets.

Another policy priority is to further reduce debt levels, especially among low-income households”, she said.

New ingredients of a better economic vintage

Georgia needs more higher-quality jobs and higher productivity to boost potential growth and living standards, said Lagarde, adding that this is not an easy task because Georgia’s growth potential has been held back by rapid population aging and the fact that many Georgians are seeking job opportunities abroad.

At the current, long-term GDP growth rate of 5.2%, it would take more than 10 years for Georgian living standards to reach those of emerging European nations - which shows just how important it is to take the right policy steps”, she said.

Lagarde said that powerful new ingredients to produce a better economic vintage should be connectivity, education reform, good governance and institutional reform and young people.

Think of the vibrant fashion and music scenes here in Tbilisi. Think of the startups that are reshaping the way we manage our finances and run our business. And think of the young Georgian chefs and wine-makers who are attracting global attention”, said Lagarde.

She added that today policymakers have an opportunity to take the right steps to create a more resilient and more inclusive economy in Georgia.