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Georgia: economic measures to combat the Covid-19

Recovery plan for the Georgian economy

The IMF has not revised Georgia's growth rate for 2020 after the mission of their representatives in mid-February, it remains at 4.3%. According to the announcements of the Minister of Finance and the Governor of the Central Bank, in the event of a sharp contraction in tourism revenues, the authorities would eliminate budgetary budgets to maintain economic growth at 3%. Public debt and the budget deficit are low (40% and 2.1% in 2019 respectively) and the entire bond obligation of 230MUSD programmed in the 2020 budget to stimulate the economy.


Georgia has taken severe containment measures which have a strong impact on its economy and one of its main sources of growth, tourism (11MUSD loss per month). Most trips were canceled until May. However, the hotel and restaurant sectors are the main source of foreign currency for the population, part of which represents the gray economy (estimated between 20 and 40% of GDP). The economy would therefore be partly deprived of its cushioning mattress which will also weigh on consumption. A recovery in tourism in June remains uncertain, the cancellation figures at the end of March will be more decisive in this regard.


The real estate market is expected to depreciate and the construction sector to slow down, which the authorities could offset with a policy of continuing investment in infrastructure, spending to be increased by $ 100 million.


The collapse in oil prices, which benefits the Georgian economy as an oil importer, will drive down external demand and weaken remittances from migrants from oil-exporting countries. The dependence on these flows historically from Russia and Azerbaijan, although decreasing in 2019, remains strong. Italy is the first European country of remit, but that many Georgians seem to have fled.


Consequently, the risks of reduction in foreign currency inflows have increased, leading to depreciation. The psychological limit of the lari exchange rate of 3GEL / 1 USD has been crossed. The Central Bank, while leaving the interest rate unchanged at 9%, intervened on the markets on March 13 for the first time since the beginning of the year to sell 20MUSD and bringing the exchange rate to 3.0118 GEL for 1 USD, a devaluation of 5% since the start of the year. The NBG has said it is ready to continue its intervention if the situation calls for it.

In response to the financial crisis, the Government announced its plan to revive the economy in the amount of 350MUSD of which here are the first measures:

• The automatic VAT reimbursement system, introduced last year, will be accelerated to double the reimbursed amounts, which will drop from 600MGEL to 1.2Bn GEL in 2020.

• The postponement until November 2020 of payment of taxes on property and income of legal persons in the tourism sector for the period March-June is recorded. This measure costs 35MUSD and will benefit 18,000 companies which employ 50,000 people.

• Credit Interest for hotels with 4 to 30 rooms will be paid by the Government. Measure which will benefit 2000 establishments.

• The two main banks in the country (TBC and Bank of Georgia) offer a 3-month grace period (interest and principal) on loans from individuals and micro businesses in the tourism sector. Bank of Georgia extends this measure to consumer credit.

• The opposition is also pushing the government to suspend the payment of compulsory pension contributions for a period of 8 months.

• The Prime Minister announced the initiative of the Cartu Fund (charity fund created by M Ivanishvili, billionaire and president of the ruling party) who said he was ready to allocate to the State resources necessary to protect the population against corona virus and fight disease.



Head of the Tbilisi Economic Service




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