Georgia has improved its position moving from 25th to 16th place in the 2014 Index of Economic Freedom compiled by an international organization “Fraser Institute” asserting its place in the list of the countries with the freest economy. It should be borne in mind that the rating reflects data for 2012 and does not take into account the situation in 2013-2014.
The annual survey of economic freedom examinesthe situation in 152 countries and takes into account several criteria – sizes of the bureaucratic apparatus,expenditure allocated for it, the level of protection of property, the freedom of the judiciary, monetary policy, foreign policy freedom, regulation of business, the state of the credit system, and the level of employment.
These points in turn contain 40 different sub-points, which generally determine the degree of economic freedom.
In the current ranking Georgia markedly improved its performance and took the 16th position
According to the expert Paata Sheshelidze, the reason for this is the reduction of the state apparatus, which in turn was a result of a large-scale privatization – the state reduced their participation in the economy and abandoned a significant portion of property. In 2012, a downward trend of government expenditures in relation to GDP was also recorded. There are improvements in the legal system – in particular, a level of protection of citizens’ interests in litigation has increased. Georgia’s position in the ranking was improved due to the monetary policy, reduced inflation and regulations,”- the expert notes.
At the same time, in his words, the high positions in the economic freedom index do not mean that the country has reached a high level of development.
“It just means that in the case of long-term continuation of such policies, standards of living may rise faster than under a current lower level of economic freedom. This is evidenced by the fact that the rating is topped by Singapore and Honk Kong that only 50 years ago were quite poor countries with a very dubious prospect. But today they are world leaders in terms of population welfare. It became possible primarily due to the fact that the governments of these countries didn’t stay the course of economic freedom ,”- Paata Sheshelidze says.
Moreover, in his opinion, we should expect that, as per the data for 2013-2014 years, the situation will get worse, as a policy of tax cuts was not continued, excise taxes increased, new regulations were introduced, government obligations increased, privatization was virtually halted.
In his view, the current state of economic freedom demonstrates the low level of investment – in the second quarter, it totaled USD 151 million, this is the lowest level for the past 8 years.