ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

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Mar
04

Lari Depreciation: Is a Financial Crisis on the Horizon?

The recent bouts of sharp lari depreciation caused much anxiety among the Georgian population, prompting fears of inflation, loan defaults, and bank failures, on the one hand, and the typically Georgian political speculations over “who is to blame”, on the other. In and of itself, a moderate lari depreciation is not necessarily a bad thing for the Georgian economy. It makes Georgia cheaper and more competitive relative to the rest of the world, reducing the current account deficit and carrying a promise of future investment and jobs. That said, a deep an...
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Feb
06

New Labor Migration Law – Homemade Explosive Device in the Making

LEGISLATING GEORGIA’S WAY INTO THE EUROPEAN COMMUNITY – LESSONS FROM RECENT HISTORY On September 1, 2014, the Georgian society woke up to a very unpleasant reality – after years of extremely welcoming visa regime which put the country on the map as an attractive tourist and foreign direct investment destination, a new migration law regulating foreigners admission and stay in Georgia came into effect. Business owners, foreign students, employees of large and small companies, and even residents of Georgia’s border areas found themselves in a very uncertain...
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Jan
23

Georgia’s Trade in 2014: Does Export Decline Suggest a Loss of Competitiveness?

According to the latest GEOSTAT figures, merchandize exports from Georgia decreased by 1.63% between 2013 and 2014. This is certainly not great news for the country, but does it imply that Georgian goods have become less competitive on the world market? Recent trade data suggest that this is not necessarily the case. The first thing to note is that much of the decline in exports is related to one particular activity – the re-exports of Georgian cars to Azerbaijan and Armenia. Beginning in 2009, this business has become a “cash cow”, capitalizin...
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Dec
08

Lari Winter Blues – Should We Worry?

In the past two weeks Georgians have been waking up with a sense of déjà vu. In a matter of days, the Georgian currency lost over 8% of its value against the US dollar, and reversed the course of appreciation against the euro. The lari winter blues are reminiscent of the last months of 2013, when, after a long period of stability, the lari lost about 5% of its value against the dollar in the course of ten weeks. The current episode of sudden depreciation sent ripples of worry through the Georgian society and prompted opposition parties to sharply critic...
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May
05

The Mystery of the Russian Economy (Part 2)

For a long time Russia was seen as the land of opportunity for foreign investors. The allure of the country with large population, vast natural resources, and more importantly, a large middle class willing to spend money, was irresistible. The burgeoning economy, however, held a few secrets which threatened to derail investors’ hopes. Last week we started to discuss the ‘bear traps’ or structural inefficiencies built into the economic system in Russia. In particular, the rent management system in the Soviet Union centered around the idea of indirect reso...
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Apr
28

The Mystery of the Russian Economy

Until very recently Russia was considered by many foreign companies a somewhat difficult but promising country for investment, a “land of opportunity” that perhaps necessarily came with a hefty dose of a “riddle wrapped in mystery inside of an enigma”. The difficulty was stemming primarily from Russia’s heavy-handed bureaucracy. Stories of corrupt practices, politically motivated court decisions and questionable tax authorities’ tactics abounded. While this may have scared off smaller investors, the large companies are typically no strangers to such chal...
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