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Finance Minister: Economic Activity Grew by 13%

An interview with Finance Minister Nodar Khaduri

In April, the economic growth amounted to 2,7%, which in your opinion was associated with decreased activity of casinos. Can you confirm this opinion? 

In May, the economy grew by 6,3% – 6,5%, economic activity grew by 13%, including in construction by 31%.

As for April, growth was relatively low, but mainly due to  the most evident  decline in two areas – financial sector and utility payments due to the fact that the cost of cleaning the city was separated from the electricity tariff, resulting in lower prices. There is also a factor associated with the casino.

But the economy does not depend only on the turnover of casinos and moreover,  utility tariffs.There was a time when the government stated that casinos turnover equaled 100 million GEL.Has something changed after that? 

In this case we are not talking about the budget revenues, especially since the plan for fiscal revenuefor the six months was performed by  103%. We are talking about economic growth, only in April. The result is different for all other months.

As I said, in May economic activity grew by 13%, including in construction – by  28% , in real estate –by 21%, in agriculture – by 21%, in the mining industry- by 12%. So there is a real progress.

In January-May growth was 6.3%, despite the low rate in April.
We predicted a 6% growth, the World Bank – 6, 5%, although, in the backdrop of events in Ukraine it was expected that growth would  drop to 5,5%. It turns out that the real growth exceeded expectations.

But there is evidence that growth is due to government spending while in private sector a decline was registered. 

I cannot agree with it. Many have criticized us for slow implementation of infrastructure projects, which led to problems in the private sector. But infrastructure projects are primarily implemented  by the state.

Many say that a shortfall in  the 2013 budget  amounted to  GEL 632 million. How did it happen?

A low economic activity in May 2013 was the main problem, when there was even an economic slowdown. A 5% growth was registered only in April and even closer to the end of the year – in October and November. Naturally, the decline in economic activity entails a reduction in tax revenues. That was the problem and not in the tax system.

In the second half of 2013, when political risks were minimized, business became more active, investments came into the country- in particular, in the first quarter of 2014 investments amounted to USD 206 million, which is significantly higher than in all previous quarters.

I hope that the business will become even more active, and business people confirm it.

Last year we tried to finance all projects that we had, but ran into some problems because of which wefailed to master all the allocated funds.

We are reproached that we take debts. But in fact this year we covered the external debt of USD 1billion, most of those debts were taken by last government. Now a volume of external debt hasdeclined.

We have also implemented a new practice –we place treasury bonds in Georgian banks and the gained amounts refund to banks at a small percentage so that they could lend long-term business projects.

Our banks have  no shortages of liquidity, but face  problems with long-term money – they prefer to lend short-term projects designed for a quick payback. That is why the government decided to provide part of the received funds to banks so that they could finance long-term projects.

Naturally, this has  not been reflected in the economic growth figures  so far, since such projects need a lot of time.