Publication: Georgia Public Expenditure Review : Strategic Issues and Reform Agenda
Date
2014-06-11
ISSN
Published
2014-06-11
Author(s)
World Bank
Abstract
Generating growth and creating jobs
within a sustainable fiscal framework is Georgia s biggest
macroeconomic challenge. Although Georgia registered rapid
growth of 5.7 percent a year during 2010-13, unemployment
remains high at 15 percent. New growth companies, especially
in tourism and other service sectors, did not generate
enough formal or even informal employment. Fiscal policy
played a crucial role in Georgia s recent growth performance
with a fiscal stimulus driven post-crisis recovery which
increased deficit and debt levels followed by fiscal
consolidation during 2010-12 when recovery took hold. The
weak execution of the budget in 2013 and policy uncertainty
were largely responsible for the growth slowdown during the
year. Tackling the growth and jobs agenda in Georgia will
require significant investment in human and physical capital
and the government has a large role to play here. Additional
spending, where it is needed, should be undertaken within
the fiscal consolidation agenda of the government, designed
to help restore the macroeconomic buffers needed to secure
stability and sustain confidence in the future. The change
in government in 2012 marked a shift in fiscal policy with
prioritization of recurrent social expenditures over capital
spending, thereby, increasing budget rigidity. During
2012-13, the government raised the benefit levels under the
targeted social assistance (TSA) and pensions and introduced
universal health care (UHC). As a result, the fiscal deficit
is likely to increase from 2.6 percent of gross domestic
product (GDP) in 2013 to 3.7 percent in 2014. Over the
medium term, an aging population and the need to improve
health outcomes and coverage of the poor in social
assistance programs will keep social expenditures high at
more than 9 percent of GDP. The share of capital
expenditures will level off, meanwhile. Such an outcome will
reduce the government s flexibility in trimming current
expenditures in the future.
Citation
“World Bank. 2014. Georgia Public Expenditure Review : Strategic Issues and Reform Agenda. © Washington, DC. http://openknowledge.worldbank.org/handle/10986/19301 License: CC BY 3.0 IGO.”