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Journal number 4 ∘ Marina Tabatadze
Strategy of State Support of the Economy in the Post-Pandemic Period

One of the main economic fonctions of a state is to prevent developmental risks and to define correct national anti-crisis policies in harmony with global requirements. The last pandemic processes particularly highlighted the importance of state’s economic fonction and of its governing role. This article discusses some strategies for effectively managing integration processes and the economic mechanisms of a state which interfare with the state governance system. To do so, the article analyses the state’s economic fonction during a non-stable development and the impact of anti-crisis policy on socio-economic system and on the stablisation of development processes.
Among others, the article presents the key topics underlining the state fonction in crisis management: stabilisation strategies of modern world economic processes, correct coordination of the state system in a crisis environment and optimal repartition of fonctions among states, modern concepts of political and economic systems of economic governance after a crisis period, adéquation of national anti-crisis reforms with global standards.
A significant transformation of state functions takes place in a crisis environment, as the crisis shakes the principles of the gradualist concept of the post-industrial society and causes deformations of existing macroeconomic balance (Tabatadze & Tsanava, 2009). The recent global economic fluctuations and a clearly expressed cyclical nature of development, required significant changes in the neoclassical principles and activated Keynesian approaches to the economic essence of the state (Durcova, 2021).
The article analyses the case of Georgia. It examines the outcomes of Georgia’s reforms which aimed at effective management of pandemic crisis. To do so, the article studies the state anti-crsis plan and post-crisis strategies in 2021-2022, their main instruments and actual outcomes. It evaluates the main steps and mechanisms of post-crisis rehabilitation state strategy, the main macroeconomic results of state economic support and the future perspectives of Georgia’s economic development.
Georgia showed one of the best results of global crisis management in the world. This experience has become a precedent for other countries. Two billion GEL was allocated from the state budget to the anti-crisis program, which went in two priority directions: Financing of state social projects (granting of allowances, financing of social protection projects of the population, increase of teachers’ salaries, indexation of pensions) and promotion of business (430 million GEL). The increase in state expenditures increased the budget deficit during the pandemic crisis from 2% to 9%, and by 2024 it is planned to restore this parameter to the pre-crisis level.
A key success factor can be identified as the government’s attempt to maintain a balance between managing the pandemic and minimizing the economic damage. At the beginning of the crisis, the pandemic caused a sharp decrease in the economy of Georgia and further aggravated the existing problems: exchange rate of GEL, inflation, investment, unemployment, and public debt. The largest decrease was recorded in the hotel and restaurants sector – 80%, followed by a 20% decrease in the transport and warehousing sectors. Entertainment and leisure sector services decreased by 15%.
The regulatory function of the state has significantly increased in the process of risk prevention and development of a complex anti-crisis strategy. As the environmental, social and governance components of a sustainable economy have a significant impact on systemic risks, their regulation required an active involvement of the state and the use of relevant tools. State programs of entrepreneurial support, transfers to domestic farms and social assistance for persons with limited liquid funds showed significant results. Thanks to this new policy Georgia managed to provide a large-scale fiscal support to households in the second phase of the crisis, by expanding the purchase of assets, increasing credit financing, and reducing the interest rate.
In the strategy of state support of the economy, a special place was given to the rational spending of state funds and the issue of regulating the state debt. The new policy is derived from the basic requirements of the « EU Fiscal Rule » and aims at four outcomes: control the budget deficit, increase the efficiency of spending of funds, reduce the cyclicality of fiscal policy and prevent its unsustainability. Georgia also changed its priorities in terms of economic policy. The transit and tourism function were defined as the main priorities of the Georgian economy, with the aim to create prerequisites for a stable positioning in the world markets. In 2021, the growth of the Georgian economy amounted up to 10.6%, which was the best result in the region and the second-best result in Europe. IFM predicted to Georgia the highest economic growth in the region and in Europe (34.5%) for a medium-term period (2021-2025). In 2022, compared to the previous year, the volume of PUI doubled and reached an unprecedented level for Georgia – 1 billion 675 million USD which created additional resources for economic growth (Geostat, 2020).
0ne of the biggest challenges for Georgia during the pandemic and post-pandemic period, was the management of the state debt. Even though the state debt exceeded the safety limit (2020-60.3%, 2021-60.1%), the scale of economic rehabilitation made it possible to return it to the normative framework already in 2022. To ensure macroeconomic balance, it’s important to make a complex study of its indicators. In addition, it is necessary to correctly assess the optimal portfolio of public debt and determine the effect of public debt for the medium and long term.
As a result of this above listed state support to prevent the negative effects of the economic crisis, Georgia managed to guarantee that not a single large enterprise stopped operating in the country. At the same time, international reserves increased by 11.5% and local exports by 3.5%, 1,056 million; the trade deficit improved in US dollars and amounted to 4.7 billion USD. In 2021 the international credit rating company Fitch kept Georgia in the BB category of the economic stability according to the ease of doing business and the attractiveness of the business environment, maintaining the investment environment, and ensuring resilience to external shocks.

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https://idfi.ge/ge/georgia_in_the_global_innovation_ index_2022

Keywords: State anti-crisis strategy, stability of economic policy, development strategy, state economic support.
JEL Codes: E60, E61, O11, O12