17, July,2009

Influience of the Gobal Finnancial crisis on the Economic development of

Georgia

Tokmazishvili Mikheil

UNDP- “Gender and Politics in South Caucasus” programme

17, July,2009

Characteristics of the Global financial Crisis

Prices on the flats and constructions (“Bubble”). Postponing of the obligations by the householders and interest growth. Decrease of the sale of securities (loans) on the houses

Believer of the investors to the security markets and mortgages failed

Increased TED spread (ratio of the inter banks interest rate (LIBOR) and T-Bill rates ), that was credit risks growth indicator

17, July,2009

Precondition of Recession in Georgia

Increase of the prices on constructionexternal reasons of the recession – decrease of the foreign credits and FDIDecrease of the foreign demand caused failed of the commercial financial resources

17, July,2009

Precondition of Recession in Georgia

Attractiveness of the consumers loans. In 2008-2009 decreased by 40 percent

Decreased loans in Agriculture, industry and construction by 76 percent and in health care - by 36 percent

Increased loans in transport communication and education

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Crisis channels

Demand Fall on local output and productionFDIScarce financial flowsFall of consumption prices

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External Demand fall Import decrease prevailed of import Import – oil and oil production, care, pharmacy goods

etc Export - manufacturing production, machinery,

mechanic devices, beverages and nuts Conclusion: Decrease on external demand caused

limitation of output and labor in the fields, which traditionally is considered as males employment and source of their primary incomes

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External Demand fall (Georgia Export/import)

-

100 000,0

200 000,0

300 000,0

400 000,0

500 000,0

600 000,0

700 000,0

800 000,0

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FDI and Scarce financial flows

FDI decrease caused economic activities fall Reduction of meditations of banks

Conclusion: limitation of economic activities cause fall of the populations incomes and increase of unemployment. Banks stopped to play financial injections role.

17, July,2009

Consumer prices fall

CPI_ fall- way out from the crisis Governmental interventions increase demand on

output and hampers prices fall Forms of State intervention in Georgia Indirect financing of uncompleted constructions Commercial banks, loans, obligations

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Conclusion: Drawling recession Problem of inflation

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 210

saqartvelo msoflio

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

saqar T vel o msofl i o

Growth rate

Dynamics of prices

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Crisis Messages Global financial Crisis has a serious impact on

Georgia Economic growth failed rapidly, inflation n reduced

slowly Increased pressure on fiscal and payment balances Risks remained dominant New challenges of Policy Keep stabilization and support aggregate demand

while FDI is reducing Decrease uncertainty of financial turmoil Keep middle term goals Neutralization of social tense

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Policy challenges

Fiscal measurement in context of deterioration of ye investment environment

Monetary policy against decrease of demand for reducing CPI

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G Policy challenges: gender results

Increase unemployment – construction – increase of male unemployment

Loans problem – increase gender disproportions

Bankruptcy of small and medium entrepreneurs

decrease of family incomes and employment

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SME share

 

 200

3 2004 2005 2006 2007 2008

turnover 24 22,5 23 18,7 14,5 15,6

outcome 20,6 20,3 21,5 18,9 16,1 17,3

17, July,2009

Policy challenges: gender results

Expected scenario:Self-employment growthIncrease role of women\Municipality expenditures decrease on kindergartens and another social needsHealth care expenditures growth by households