Tbilisi: Prime Minister of Georgia, Irakli Garibashvili, held a meeting with Finance Minister Lasha Khutsishvili and deputies. The work focuses on the plans and key directions of the Ministry of Finance for 2023. The talk touched on the dynamics of the implementation of “Georgian Development Strategy – Vision 2030”.
The Finance Minister and his deputies briefed the Prime Minister on macroeconomic and fiscal parameters for 2023.
It is noted that after the economic growth of 10.5% recorded in 2021, it will also record double-digit growth of 10.1%.
As known, for 2023, forecasts of economic growth and GDP deflator indicators are 5%, and the nominal total domestic product – is up to 80 billion GEL. In the coming years, the economic growth rate is maintained at an average of 5 per cent, while the total domestic product deflator forecast is 3 per cent.
Accordingly, the nominal index of the total domestic product, predicted in 2023, will increase from 79.7 billion GEL to 101.2 billion GEL in 2026. GDP per capita is expected to exceed $8,000 by 2023 and by 2026 – $10,000.
It is noteworthy that according to the International Monetary Fund’s forecast, in the medium period 2022-2027, Georgia will have one of the highest growth between the region and European countries and will be 5.8%.
The working session discussed a 3-year program with the IMF to support the country’s reforms. In between the reforms:
• State Enterprises Reform;
• State investment management reform;
• Tax spending analysis and optimization
As noted, the reform of state-owned enterprises is the most important and the largest fiscal reform. The reform strategy has already been approved, and necessary legislative changes are being worked on. At the same time, the reform process in pilot enterprises will continue actively.
In addition to the electrical system, pilot enterprises have been defined as:
• Georgian Railway;
• Gas transportation company;
• The union of airports.
The meeting spoke about the progress made by Georgia towards international credit ratings. As it is known, recently, the rating company Fitch has improved the perspective of Georgian sovereign credit rating from stable to positive and evaluated the rating at the BB level.
Macroeconomic policies in the post-pandemic period have played a crucial role in improving the outlook, with which to the end of 2022:
• Reduction of government debt;
• Reduction of the fiscal deficit;
• Filling up the international reserves.
It is noteworthy that in 2022, Georgia improved its debt to GDP in comparison to 2019 – before the pandemic. In 2022, the debt to GDP will be 39.6%, while in 2019, it will be 40.4%.
This, in turn, has contributed to high economic growth and reduced external constraints such as the current account deficit and dollarization.
According to international rating company Fitch, maintaining the trend of improving these factors will be a precursor to an improvement in the BB+ rating.
As in previous assessments, the agency considers them to be the strengths of the rating:
• High quality of economic governance;
• Stable, reliable macroeconomic and fiscal policy.
It’s important to keep up with the current account deficit and dollarization trend, which will help improve credit scores in the future. This means international rating company Fitch expects ratings to improve in the forthcoming ratings, leaving the country one step ahead of the investment rating.
PM Garibashvili heard information on measures taken to improve the management of state investments. Within the framework of the Monetary Fund and the World Bank technical assistance, work is underway to update the methodology of investment projects that will specify criteria for which projects will be subject to mandatory prevaluation.
Another issue focused on at the meeting was the analysis/optimization of the tax breaks. It is noted that with the help of the Monetary Fund, it is planned to study of the cost-benefit of the large tax breaks from this year.
At the meeting with PM Garibashvili, they also discussed other plans of the Ministry of Finance for 2023:
• On May 2-5, 2023, Georgia will be presented in the city of Incheon, Republic of Korea, as the host country of the Asian Development Bank for 2024;
• In 2023, the action plan for the transfer of state-owned enterprises treasury classified as public units will be developed step by step (full from 26), and the preparation of public schools for the transfer of the treasury of 2024 treasury unified account system;
• A new medium-term strategy for public finances will be approved;
• The renewed strategy of debt management will be approved;
• Work will continue to perfect the management of public finances of municipalities, including in accordance with the principles of fiscal decentralization;
• Work on the completion of consolidated financial statements based on IPSAS principles will continue.
PM Garibashvili new tasks to the Finance Minister and his deputies on the occasion of Tatbir.