კონფერენცია

∘ Khatuna Todua ∘
THE EFFECT OF COVID -19 ON THE ECONOMY OF GEORGIA

Summary

The coronavirus pandemic is affecting the global economy in an unprecedented way, and it is leading to a downturn, which is much deeper than that of any other economic crisis in the history of recent decades. It is not the easy task to estimate the depth and duration of the recession: for each country it will depend on specific economic situation, circumstances, strengths and vulnerabilities as well as on the development of pandemic. This includes also demographics, the level of healthcare development, the integration in global value chains, the level of dependence on tourism sector, etc.

Georgia reported its first case of Covid-19 on February27, 2020 and its first deaths on April 6, 2020. The government reacted immediately - it banned direct flights from China in late January 2020 and imposed severe travel restrictions even within the country in March 2020.Universities as well as schools were closed on March11,2020, and furthermore, the country declared the state of emergency. The four bigger towns of Georgia – Tbilisi, Kutaisi, Rustavi and Batumi – were put under lockdown.

From the very early days of the pandemic, the Georgian Government directed its efforts not only aiming to save the health and lives of the people, but the national economy as well.

Therefore, all the steps taken by the government have been determined by the obligation assumed by the government to protect the health and lives of the population and the motivation to save the country′s economy. Besides, in parallel to the prevention of the spread of the virus, the government of Georgia has provided citizens with social support while also ensuring the provision of support to business and the economy in order to alleviate the effects of the pandemic.

Still the Covid-19 crisis is profoundly affecting Georgia′s economy, which suffers from weaknesses, making it vulnerable to shocks such as the pandemic one.

The macroeconomic impact of pandemic on Georgian economy is occurring through a mix of both external and internal factors. The internal ones are caused by lockdown restrictions, leading to the closure or disruption of business activities, diminished consumption and the impact on the real economy. The external factors include: international market prices, border closures and the pandemic effects in other countries, trade restrictions.

The virus caused almost entire suspension of tourism – the sector which had grown strongly in recent years, - and related activities (for example, retail and services), it is noticeable, that Georgia derives more than 30% of its GDP and 45% of its exports from tourism.

Besides, yet more importantly, lower remittance inflows and weaker demand for goods and services are weakening Georgia′s economy. The crisis requires both immediate action supporting the economy, as well as medium-term strategies (such as increasing local production, for example) for bringing the economy back on a path of resilient growth. The government must also work hardly with international partners to attract funding and investors, so as to ease the results of the crisis to the greatest possible degree.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Khatuna Todua ∘ THE EFFECT OF COVID -19 ON THE ECONOMY OF GEORGIA Summary The coronavirus pandemic is affecting the global economy in an unprecedented way, and it is leading to a downturn, which is much deeper than that of any other economic crisis in the history of recent decades. It is not the easy task to estimate the depth and duration of the recession: for each country it will depend on specific economic situation, circumstances, strengths and vulnerabilities as well as on the development of pandemic. This includes also demographics, the level of healthcare development, the integration in global value chains, the level of dependence on tourism sector, etc. Georgia reported its first case of Covid-19 on February27, 2020 and its first deaths on April 6, 2020. The government reacted immediately - it banned direct flights from China in late January 2020 and imposed severe travel restrictions even within the country in March 2020.Universities as well as schools were closed on March11,2020, and furthermore, the country declared the state of emergency. The four bigger towns of Georgia – Tbilisi, Kutaisi, Rustavi and Batumi – were put under lockdown. From the very early days of the pandemic, the Georgian Government directed its efforts not only aiming to save the health and lives of the people, but the national economy as well. Therefore, all the steps taken by the government have been determined by the obligation assumed by the government to protect the health and lives of the population and the motivation to save the country′s economy. Besides, in parallel to the prevention of the spread of the virus, the government of Georgia has provided citizens with social support while also ensuring the provision of support to business and the economy in order to alleviate the effects of the pandemic. Still the Covid-19 crisis is profoundly affecting Georgia′s economy, which suffers from weaknesses, making it vulnerable to shocks such as the pandemic one. The macroeconomic impact of pandemic on Georgian economy is occurring through a mix of both external and internal factors. The internal ones are caused by lockdown restrictions, leading to the closure or disruption of business activities, diminished consumption and the impact on the real economy. The external factors include: international market prices, border closures and the pandemic effects in other countries, trade restrictions. The virus caused almost entire suspension of tourism – the sector which had grown strongly in recent years, - and related activities (for example, retail and services), it is noticeable, that Georgia derives more than 30% of its GDP and 45% of its exports from tourism. Besides, yet more importantly, lower remittance inflows and weaker demand for goods and services are weakening Georgia′s economy. The crisis requires both immediate action supporting the economy, as well as medium-term strategies (such as increasing local production, for example) for bringing the economy back on a path of resilient growth. The government must also work hardly with international partners to attract funding and investors, so as to ease the results of the crisis to the greatest possible degree.