BAKU, Azerbaijan, April 11. To avoid the consequences of the hostilities between Russia and Ukraine, and their impact on the region, the Georgian Government should support the country’s business sector’s transition from the Russian market, the ISET Policy Institute (ISET-PI), Georgia’s independent economic policy think-tank, told Trend.
According to the ISET-PI, as the National Bank of Georgia will have to keep the monetary policy tight in order to stabilize the inflation rate, the financing for the business sector will consequently increase. However, as Georgia will most likely not reach the expected GD growth, a gap in the country’s budget will be created, which will lead to the postponing of the ongoing projects, and, thus, slow down business sector development.
Furthermore, as economists say, Georgia’s companies will have to find other trading partners amid the crisis, while many companies will also “self-sanction” in trying to reach alternative markets.
“Such transition is going to be a costly measure for Georgian manufacturers, as it will require the rework of the supply chain and different aspects of dealing with new partners,” the institute said.
Moreover, another severe impact of the conflict between Russia and Ukraine is that Georgia could regardless become less attractive as an investment partner for foreign businesses, the economists noted.
Thus, according to the ISET-PI, to decrease the impact on businesses, the government should consider helping companies transition away from the Russian market. For instance, decreasing the tax rate for some period will allow businesses to start their new operations with European partners. Secondly, partnering with Georgian banks to postpone payments on businesses’ loans (similar to how it was implemented during the COVID-19 pandemic outbreak).
“In light of Georgia’s plans for strategic partnership and eventual membership in the EU, the country should continue signaling its commitment to international law and order and future membership in the EU,” the ISET-PI concluded.
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