ISET

Between June 9-10, Mr. Labadze attended the 4th Asia Think Tank Summit in Seoul, an event jointly organised by the Institute of Foreign Affairs and National Security (IFANS) at the Korea National Diplomatic Academy (KNDA), the Korea Development Institute (KDI), the Korea Institute for International Economic Policy (KIEP), the Civil Society Program (TTCSP) of the University of Pennsylvania, and the Asia Development Bank Institute (ADBI).

The Summit dealt with the issues surrounding the Sustainable Development Goals (SDGs) adopted by the UN last September, which ambitiously set a new development cooperation paradigm for the global community. Present challenges faced by Asian countries were discussed in detail, such as collaboration between the government, private sector and civil society, as well as with individual nations. In addition, despite the fact that economists and politicians frequently claim that Asia has great economic potential, issues such as economic integration being set against political rivalries. This latter matter is concerning to the degree that Asian nations paradoxically currently have potential for conflict and collaboration with one another in equal measure.

On Wednesday, May 18 Hans Timmer, Chief Economist of Europe and Central Asia (ECA) at the World Bank, paid a visit to ISET. He delivered a presentation entitled “Economic Outlook for the South Caucasus”, transmitting idea that the countries of Europe and Central Asia (ECA), including Georgia, are transitioning to a situation - against the backdrop of a weakening global economy and volatility in international financial markets - which is called 'New Normal', and is characterized by the slow trend growth of global trade, low commodity prices, and less abundant availability of international liquidity.

Mr. Timmer thinks that for ECA-oil-exporting states it will be painful to adjust their economies to low commodity prices, but this adjustment is not avoidable and will be followed by declining household incomes, sharp real deprecations, falling asset prices, job losses in trade, construction and domestic services, and increased fragility in semi-dollarized financial sectors. Similar problems are arising in other countries which have strong economic relations with oil exporters through remittances and trade flows such as Russia and Georgia. Due to declined trade and reduced real remittances, most of the affected countries have seen their purchasing power drop more than was originally suggested by GDP numbers.

On May 13, 2016 ISET hosted the head of the IMF in Georgia, Azim Sadikov, who delivered a lecture for participants of ISET’s Finance Course for Professionals. The subject of his lecture was “Macro-economic challenges in Georgia and the strengths and weaknesses of its emerging capital markets”.

During his presentation, Mr. Sadikov discussed existing macroeconomic challenges for Georgia. He emphasized the current account deficit as the most important problem for the Georgian economy, which resulted in one of the highest net foreign liabilities to GDP ratio (136%) in Central and Western Asia. In order to finance this deficit, Georgia borrows from abroad, increasing the NFL of the country. The good news, however, is that this NFL is made up of FDI, which is considered to be a very stable source of funding. Mr. Sadikov then highlighted the importance of FDI in productive labor-intensive sectors, which will ensure production growth and accumulation of incomes from these investments in Georgia.

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