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Small and Medium Business Refuses to Expand

According to the Georgian Association of Small and Medium-sized Enterprises, these industries reduce their activities and give up prospects for growth.

Georgia has been suffering a financial crisis for 10 months, the national currency devalued  by 30%, lari depreciation has a negative impact on the purchasing power of the population that  in turn dealt a blow to business. The head of the Association Mikheil Chelidze says that the national currency is unlikely to begin to strengthen as the crisis is mainly caused by external factors.

“The region is experiencing  a crisis that will only deepen during  1-2 years. This primarily concerns Russia, which is the largest country in the region, and even Europe, to a certain extent, depends on  it. In these circumstances, Georgia is less dependent on economic relations with Russia, respectively, the damage is less than could be,” he says.

In his words, the international sanctions have caused at the time a very great damage to Iran, most likely Russia awaits something like that.

“For 10 years, Iran has  brought to the  knees, for the same period in any case, Russia will weaken and it will affect countries that are closely connected with it. This will be reflected in Georgia as well.  This is one of the problems caused by  the devaluation of the lari, and we almost cannot control the situation, Mikheil Chelidze explains.

As for the statement of the Prime Minister and the central  bank’s President that business is engaged in accumulation of currency, in his opinion,  this trend does not apply to small and medium-sized businesses. According to the head of the Association, the currency devaluation has an impact on this segment of the economy and led mainly to a decrease in a volume of small and medium business and refusal to expand.

Head of the Real Estate Association Alexander Japaridze also considers external factors responsible for the crisis. He notes that  one could not seriously expect that the difficult situation in the region would  not affect Georgia.

“This is a global crisis. Sales are falling around the world, the loans are not issued, etc. This is not to blame one person, despite the fact that the temptation to find a particular culprit is great. There is no artificial attempt to create an economic crisis. All this is due to the overall situation, and Georgia is a part of it. Now the government must make convincing steps in order the business to believe that the situation will be stable and investing is not associated with any threats,” Japaridze says.

In his opinion,  the government will be able to artificially create the appearance of a positive situation in the country for a time, which will require a lot of money, but the situation will  ultimately worsen. According to him, the only long-term way out is to improve the trade balance.