კონფერენცია

∘ Davit Bidzinashvili ∘
THREATS OF RISING INFLATION AND INEFFICIENT SPENDING OF FINANCIAL RESOURCES IN GEORGIA UNDER THE CURRENT PANDEMIC

Summary

The current world pandemic has affected several foreign exchange markets in Georgia at the same time and affected almost all sources of dollar inflows. First of all, as a result of the pandemic, tourist activity around the world has stopped. As a result, Georgia has completely lost the cash flow it received or could receive from tourism. Consequently, the market lost the share of foreign currency that was expected from the export of services (tourism).

The world economy suffered a major blow as a result of the pandemic, and revenues fell globally. Consequently, the income generated by Georgian citizens abroad has decreased (for example, in Italy, virtually all activities were limited, which is an important source of remittances for Georgia). Reducing remittances is another major source of declining dollar supply in the country.

In a volatile world economy today, investors are looking forward to the transition. According to the International Monetary Fund, investors have already raised $ 83 billion from emerging markets (including Georgia), which is the highest rate of capital outflows to date. Consequently, a favorable situation will not be expected in terms of investment. Moreover, in terms of attracting investment, Georgia experienced difficulties even before the crisis; In particular, in 2019, the volume of foreign direct investment, compared to the previous year, practically did not increase (0.2%) and the 2018-2019 benchmark only exceeded the 2013 data.

On another source of foreign currency, exports, reduced foreign demand from trading partners has a negative effect. Consequently, against the background of the decline in trade turnover characteristic of the crisis, the volume of exports will also decrease as a result of the decrease in natural volume, as well as the decrease in the price of goods. On the other hand, Georgia's demand for imports is also declining, which in turn hinders the outflow of foreign currency and is a kind of balance of the lari exchange rate (although it seems to be insufficient).

In addition to the above-mentioned fundamental factors, the joint action of which would reduce the exchange rate of the lari in any case, it is likely that a kind of panic in the market played an important role. The data on which the role of expectations will be uniquely confirmed is not available. However, from the observation of empirical observations or observations of persons with operative information, the action of such a factor is confirmed.

The new type of coronavirus (Covid-19) pandemic has become an unexpected challenge for the world, the scale of which is unprecedented in recent history. Georgia, as a part of the open world, has found itself in a difficult situation due to a number of reasons, including economic challenges. It is almost impossible to fully predict the prospects for the development of events, the expected amount of humanitarian and economic damage.

Amid a sharp decline in economic activity, economic entities are suffering from declining revenues, which dramatically increases the risks of job losses, liabilities, inability to provide services and bankruptcies. In direct or indirect ways, almost every sector of the economy suffers, especially in the service, transport and trade sectors, the tourism industry. The listed sectors have been growing in Georgia for years and are making significant contributions to economic growth. In addition to the fact that the tourism crisis is a natural phenomenon against the background of the pandemic, the government has banned the entry of foreign nationals to the Georgian state border since March 18. Due to the state of emergency, traffic was restricted by air, sea and passenger trains. Only trucks are uninterrupted. The activities of entertainment centers, cinemas, sports and recreation complexes, beauty salons and nightclubs have been suspended, and a number of services have been restricted.

This is a global challenge, and as soon as it happens, other countries, including Georgia, will emerge from the economic crisis, and the main competition will be between countries. That we need a new vision, a new approach to the post-crisis measures that the state needs to take in order for the private sector and business to be able to get out of this crisis quickly, dial up economic activity, increase employment and get back to that very important and successful start. Which we had before the crisis.

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	∘ Davit Bidzinashvili ∘ THREATS OF RISING INFLATION AND INEFFICIENT SPENDING OF FINANCIAL RESOURCES IN GEORGIA UNDER THE CURRENT PANDEMIC Summary The current world pandemic has affected several foreign exchange markets in Georgia at the same time and affected almost all sources of dollar inflows. First of all, as a result of the pandemic, tourist activity around the world has stopped. As a result, Georgia has completely lost the cash flow it received or could receive from tourism. Consequently, the market lost the share of foreign currency that was expected from the export of services (tourism). The world economy suffered a major blow as a result of the pandemic, and revenues fell globally. Consequently, the income generated by Georgian citizens abroad has decreased (for example, in Italy, virtually all activities were limited, which is an important source of remittances for Georgia). Reducing remittances is another major source of declining dollar supply in the country. In a volatile world economy today, investors are looking forward to the transition. According to the International Monetary Fund, investors have already raised $ 83 billion from emerging markets (including Georgia), which is the highest rate of capital outflows to date. Consequently, a favorable situation will not be expected in terms of investment. Moreover, in terms of attracting investment, Georgia experienced difficulties even before the crisis; In particular, in 2019, the volume of foreign direct investment, compared to the previous year, practically did not increase (0.2%) and the 2018-2019 benchmark only exceeded the 2013 data. On another source of foreign currency, exports, reduced foreign demand from trading partners has a negative effect. Consequently, against the background of the decline in trade turnover characteristic of the crisis, the volume of exports will also decrease as a result of the decrease in natural volume, as well as the decrease in the price of goods. On the other hand, Georgia's demand for imports is also declining, which in turn hinders the outflow of foreign currency and is a kind of balance of the lari exchange rate (although it seems to be insufficient). In addition to the above-mentioned fundamental factors, the joint action of which would reduce the exchange rate of the lari in any case, it is likely that a kind of panic in the market played an important role. The data on which the role of expectations will be uniquely confirmed is not available. However, from the observation of empirical observations or observations of persons with operative information, the action of such a factor is confirmed. The new type of coronavirus (Covid-19) pandemic has become an unexpected challenge for the world, the scale of which is unprecedented in recent history. Georgia, as a part of the open world, has found itself in a difficult situation due to a number of reasons, including economic challenges. It is almost impossible to fully predict the prospects for the development of events, the expected amount of humanitarian and economic damage. Amid a sharp decline in economic activity, economic entities are suffering from declining revenues, which dramatically increases the risks of job losses, liabilities, inability to provide services and bankruptcies. In direct or indirect ways, almost every sector of the economy suffers, especially in the service, transport and trade sectors, the tourism industry. The listed sectors have been growing in Georgia for years and are making significant contributions to economic growth. In addition to the fact that the tourism crisis is a natural phenomenon against the background of the pandemic, the government has banned the entry of foreign nationals to the Georgian state border since March 18. Due to the state of emergency, traffic was restricted by air, sea and passenger trains. Only trucks are uninterrupted. The activities of entertainment centers, cinemas, sports and recreation complexes, beauty salons and nightclubs have been suspended, and a number of services have been restricted. This is a global challenge, and as soon as it happens, other countries, including Georgia, will emerge from the economic crisis, and the main competition will be between countries. That we need a new vision, a new approach to the post-crisis measures that the state needs to take in order for the private sector and business to be able to get out of this crisis quickly, dial up economic activity, increase employment and get back to that very important and successful start. Which we had before the crisis.