ISET Economist Blog

A blog about economics in the South Caucasus.
Filter By:
  • Macroeconomic Policy
  • Agriculture and Rural Policy
  • Energy & Environment
  • Governance and Social Policy
  • Private Sector Development
  • Givi Melkadze
  • Giorgi Machavariani
  • Andrei Sarychev
  • Giorgi Mekerishvili
  • Nino Abashidze
  • Aleqsandre Bluashvili
  • Rezo Geradze
  • Giorgi Bregadze
  • Aram Derdzyan
  • Astghik Mkhitaryan
  • Giorgi Kelbakiani
  • Giorgi Tsutskiridze
  • George Basheli
  • Ia Vardishvili
  • Robizon Kukhalashvili
  • Tom Coupe
  • Adam Pellillo
  • Lasha Arevadze
  • Saba Devdariani
  • Nino Mosiashvili
  • Nikoloz Pkhakadze
  • Jan Klingelhofer
  • Martin Smith
  • Medea Davlasheridze
  • Tamari Giorgadze
  • Aram Grigoryan
  • Charles Johnson
  • Levan Bzhalava
  • Maya Grigolia
  • Izat Berenaliev
  • Lasha Lanchava
  • Nino Zambakhidze
  • Nino Doghonadze
  • Simon Appleby
  • Rafael Castro
  • Givi Kupatadze
  • Ruediger Heining
  • Mariam Zaldastanishvili
  • Zurab Abramishvili
  • Salome Goglichidze
  • Gigla Mikautadze
  • Hans Gutbrod
  • Kalman Mizsei
  • Ivane Pirveli
  • Irakli Galdava
  • Victor Kipiani
  • Florian Biermann
  • Irakli Shalikashvili
  • Olga Azhgibetseva
  • Phatima Mamardashvili
  • Eric Livny
  • Aleksandra Markovic
  • David Zhorzholiani
  • Nino Kakulia
  • Matsatso Tepnadze
  • Laura Manukyan
  • Irakli Barbakadze
  • Lika Goderdzishvili
  • Selam Petersson
  • Sophiko Skhirtladze
  • Irakli Kochlamazashvili
  • Levan Pavlenishvili
  • Jemal Tsintsabadze
  • Nika Molashvili
  • Gocha Kardava
  • Rati Porchkhidze
  • Mariam Galdava
  • Lasha Labadze
  • Guranda Darchidze
  • Muhammad Asali
  • Karine Torosyan
  • Levan Tevdoradze
  • Mariam Katsadze
  • Ana Burduli
  • Davit Keshelava
  • Giorgi Mzhavanadze
  • Elene Seturidze
  • Mariam Tsulukidze
  • Erekle Shubitidze
  • Guram Lobzhanidze
  • Mariam Lobjanidze
  • Mariam Chachava
  • Maka Chitanava
  • Salome Deisadze
  • Ia Katsia
  • Salome Gelashvili
  • Tamar Sulukhia
  • Norberto Pignatti
  • Giorgi Papava
  • Luc Leruth
  • Yaroslava Babych
Read more
COVID and the City – A Spatial Fracture in Georgia?
ISET-PI's Executive Director Lasha Labadze was invited by TV1 to speak about remittances, how its defined, who are the top remitting countries, and how remittances are used in Georgia and what is the role of remittances in Georgia’s economy.  In general, high remittances makes local currency stronger, decreases poverty, but it also signals the high unemployment and weak economy in the country. In 2015 Georgia received significantly lower remittances, but in the first 6 month of 2016 it stayed at the same level compared to the same period of previous year. Watch the video from TV 1 to learn more.
Read more
COVID-19 in Georgia's Agriculture: a challenge, an opportunity or both?
ISET-PI’s Senior Researcher of the Energy and Environmental Policy Research Center, Levan Pavlenishvili, commented on the ruling of the Georgian Energy and Water Supply Regulatory Commission (GNERC) on electricity tariffs live on Maestro TV. An expected increase in prices has not been confirmed, with only a minor increase in prices for the commercial sector. Levan Pavlenishvili stated that there were variables in tariff methodology that would have caused an increase of electricity prices, while other variables would have pushed the tariff towards a decrease. Watch the video from Maestro TV to learn more.
Read more
May Certain Trends Brought By COVID-19 Be Worth Keeping Post-Pandemic?
A recent ruling of the Georgian Energy and Water Supply Regulatory Commission (GNERC) dictates that most electricity tariffs will be kept at their current rates, with a minor increase for the supply of firms. The ruling has raised a number of questions in society due to high expectations of a possible increase in tariffs. ISET-PI’s Senior Researcher of the Energy and Environmental Policy Research Center, Levan Pavlenishvili, answered questions raised by the host and audience of Radio Freedom. Some of the questions raised were as follows: how does the tariff setting in electricity sector works? How complex is the tariff methodology and how does it work? What can be the impact of a tariff increase on general price levels in the country? Watch the video from Radio Tavisupleba to learn more.
Read more
COVID-19 and Food Safety in Georgia
“Food safety risks cannot be entirely eliminated but must be managed along the entire food chain, from farm to table. Reducing food safety risks requires collaboration across sectors, stakeholders and national borders” Dr Hans Henri P. Kluge, WHO Regional Director for Europe. It has been almost a year since the world started struggling with the challenges of the COVID-19 pandemic. Countries follow the recommendations and precautions provided by the World Health Organization (WHO) in order to prevent the spread of the virus. While various businesses, schools, and other educational institutions have switched to remote work, unlike other enterprises, food production and delivery cannot be operated from the home. Consequently, during a pandemic, providing safe food to consumers as well as ensuring employee health are the biggest challenges faced by Food Business Operators (FBOs) (FAO, 2020). THE ROLE OF FBOS IN ENSURING FOOD SAFETY IN THE EU In broad terms, Food Business Operators are “undertaking, whether private or public, for profit or not, carrying out any of the activities related to any stage of manufacture, processing, packaging, storage, transportation, distribution of food, imports and including food services, sale of food or food ingredients” (Dudeja, P. & Singh, A., 2017). Thus, the foremost responsibility of FBOs is to ensure compliance with food laws, in particular the safety of food (European Commission, 2020). The European Commission defines the key obligations of FBOs as follows: • Safety – FBOs should not place unsafe food or feed on the market; • Responsibility – FBOs have a responsibility for the safety of the food and feed which they produce, transport, store, or sell; • Traceability – FBOs should be able to identify and trace any supplier; • Transparency – FBOs should immediately notify the relevant authorities if they have a reason to believe that their food or feed is unsafe; • Emergency – FBOs are obliged to withdraw or recall food or feed in the case of an incident; • Prevention – FBOs should identify and regularly review the critical points in their processes and ensure that appropriate measures are taken at these points; • Co-operation – FBOs should co-operate with the competent authorities to take action and reduce or eliminate risks related to food safety. To support these principles, the competent authorities within EU countries must ensure an adequate and effective control system. EU legislation is based on the principle that prevention is better than cure and aims to prevent outbreaks of food-borne diseases through establishing comprehensive standards relating to good hygiene, adequate labelling, own-controls, official controls, etc. The management and  crisis preparedness associated with food and feed safety is intended to eliminate or minimize the economic and health effects of possible crises. FBOs have to perform their ‘own-controls’ on production process and food to check that the applied measures are effective, and thus should demonstrate that such preventive measures are taken during food production. They are also required to implement the regulatory requirements, a code of good hygiene practice, and a Hazard Analysis Critical Control Point (HACCP). In response to COVID-19, the European Commission, in coordination with local EU authorities, adopted a regulation allowing member states to carry out controls, despite movement restrictions, so that food safety would not be compromised. Furthermore, the European Commission published the details within their questions and answers to COVID-19 and food safety document, covering production, food in shops, and food at home, which informs consumers and FBOs and addresses the main questions related to COVID-19 and food safety. FOOD SAFETY IN GEORGIA DURING THE PANDEMIC Under the EU-Georgia Association Agreement, Georgia is required to harmonize its food safety regulations and legislative basis with the EU standards and requirements. Therefore, FBOs are obliged to fulfil their legal requirements and to continue operations in an equal and competitive manner on both internal and EU markets. Through the efforts of the Georgian government, and the active participation of private stakeholders and civil society organizations, numerous regulations have been implemented to approximate a legislative basis for the EU food safety regulations and standards. The National Food Agency (NFA), established in 2010, implements all food safety, veterinary, and plant protection endeavors. In response to the pandemic, the NFA published several restrictions and recommendations for food producers, retailers, open agrarian bazaars, as well as restaurants and other food facilities. Among the good hygiene practices, required at all stages of food production, the most relevant are the cleaning and disinfection of food facilities and equipment at different stages of food processing. These protocols that safeguard employee health include: wearing gloves, masks, and special hygienic clothes and shoes when required; social distancing at work; personal hygiene, such as washing and disinfecting hands; and the recommendation to stay at home when employees first show symptoms of sickness. The NFA is responsible for the official control activities that ensure FBOs comply with the required food safety standards. As expected, COVID-19 limited the control of the application of hygiene and food safety standards in food businesses as certain official activities were postponed due to risk of infection. Between March-June 2020, when Georgia implemented restrictions on movement and even announced a lockdown in April, the number of inspections of FBOs conducted by the NFA decreased by 30% compared to the same period of 2019 (Table 1). From June, COVID-19 restrictions were relaxed and, resultingly, the number of inspections increased by 22% in July-September 2020 compared to the same period of 2019. Meanwhile, as the number of inspections increased, the number of FBOs with food safety violations also increased by 22%; notwithstanding, the cases of critical violations decreased by 39%. It appears that even though official controls are notable within a safe supply chain, the current limitations did not affect the safety of food. Table 1. Number of inspections conducted by the National Food Agency {tabulizer:include style[gr.alterora.elemental_2_blue_green.css] id[tab_veJrtFMkn9]}   2019 2020 Change   March-June July-September March-June July-September March-June July-September Number of inspections 3256 1778 2265 2175 -30%↓ 22% ↑ Number of FBOs with violations 2858 1537 1921 1874 -33%↓ 22%↑ Critical violations 185 206 109 126 -41%↓ -39%↓ Non-critical violations 2856 1531 1916 1866 -33%↓ 22%↑ Total number of non-critical norms violated 18,984 10,424 12,528 12,456 -34%↓ 19%↑ Source: National Food Agency,, 2020 Factors other than the pandemic also seem to affect the country’s food safety and FBO’s ability to comply with food safety standards. The current systemic challenges within the Georgian food quality infrastructure (e.g., limited access to certain laboratory tests and veterinary services, limited institutional capacities) have long hindered FBOs from meeting food safety standards and requirements, even prior to the pandemic. The corona virus is, nevertheless, a timely reminder of the importance of good hygiene practices and quality infrastructure for food safety. ENSURING FOOD SAFETY DURING COVID-19 While food safety is primarily the responsibility of FBOs, an efficient safety system relies on the commitment of all actors within the food chain, from farm to fork. Building a resilient food safety system requires the engagement of Civil Society Organizations (CSOs), Non-Government Organizations (NGOs), as well as farmers’ associations, to each bring together necessary resources, data, technology, and public-private partnerships. During the pandemic, the activities of CSOs, NGOs, and farmers’ associations should complement FBO work to increase awareness and enable solutions that improve transparency, traceability, and the safety of the food supply chain. It is particularly important to: • Increase awareness – While the population in urban areas is better informed of COVID-19 restrictions and prevention measures, in rural areas information on the virus is limited. Therefore, CSOs, NGOs, and farmers’ associations should provide FBOs with information and guidelines regarding food safety standards; especially, for rural FBOS and family farmers, to ensure they place safe food and feed on the market; • Conduct training – During the pandemic, CSOs, NGOs, and farmers’ associations can support FBOs by conducting online training related to food safety and hygiene (food traceability, cleaning management, procurement, and checking), which would improve the effectiveness of food safety and hygiene practices; • Work with the media – There is a rising concern that COVID-19 might be transmitted through food, yet messages from the media are largely driven by inaccurate and incomplete evidence. Thus, CSOs, NGOs, and farmers’ associations should closely collaborate with the media to provide accurate information to consumers to prevent unwarranted fears leading to unnecessary action such as the needless destruction food; • Build partnerships – Ensuring food safety during the pandemic requires the serious commitment of building a greater understanding of food safety among government authorities, food business operators, supply chain actors, and consumers. CSOs, NGOs, and farmers’ associations can facilitate the process of building partnerships among different stakeholders in adopting food safety standards to ensure that people have sufficient access to safe and nutritious food. * * * This blog has been produced within CARE Caucasus “COVID19 response and adaptation project”, funded by CARE International Emergency Relief Fund. The document has been created in close cooperation of ISET and CARE Caucasus teams. However, its contents are the sole responsibility of the authors and do not necessarily reflect the views of CARE International. See our article usage guidelines 
Read more
COVID-19 – A Threat but Also an Opportunity for More Decisive Actions Against Climate Change
Covid-19 has exposed many countries to severe healthcare and economic crises, which have disproportionally adversely affected the most vulnerable and low-income parts of society. The current pandemic crisis, however, has also brought some interesting opportunities to light. For example, it has shown that relatively quick change is possible, as the unfolding of the COVID pandemic led to significant changes in working practices and individual behaviors, leading to dramatic reductions in greenhouse emissions around the world. Building on these experiences, adopting a scientific approach and careful planning, it should be possible to develop more efficient measures to adapt to and mitigate climate change. The financial assistance and debt service relief that developing countries have been receiving from the developed world to help them provide economic stimuli to their economies also constitutes  an interesting opportunity to accelerate in pursuit of a sustainable development path, if these countries choose to invest these resources to boost the economy and support climate change action at the same time. It is especially important to keep this balance since the predicted temperature rise as a result of accumulated greenhouse gasses from amplified economic activities will negatively affect the sectors1 which primarily employ the poorest part of the world population. Consequently, further impoverishment of these communities will prevent achieving at least one of the United Nations’ (UN) Sustainable Development Goals (SDGs): no poverty in the world. WHAT ABOUT GEORGIA? Despite its initial success in containing the spread of the pandemic, Georgia is not an exception. Rising infection and death rates and increasing unemployment2 and poverty rates3, forced the Georgian authorities to direct their financial and human resources to life-saving sectors, such as healthcare and social assistance. Simultaneously, companies in the most affected sectors (tourism and services), have been given tax benefits and extensions of loan terms. Given the increased pressure on the government budget, financial resources that could be used for climate change mitigation and adaptation activities are now more limited and climate change risks occupy a much smaller space on the government agenda4, despite the country’s international commitments remaining unchanged. On the mitigation side, the country has to comply with its commitments to reduce long-term greenhouse gas emissions. In 2020, Georgia published an updated nationally determined contribution (NDC) to UNFCCC5, where the country once more took on an obligation to reduce its greenhouse gas emissions by 35% compared to the 1990 level6 and achieve sector-specific targets for energy, agriculture and LULUCF7 sectors. On the adaptation side, Georgia has already taken the responsibility in the third national communication document to UNFCCC to elaborate a 2020-2050 strategy which considers the development of National Adaptation Programs of Action (NAPA) and sector-specific adaptation strategies in the agriculture, health, and tourism sectors. Even though the adaptation plan was already elaborated for the agriculture sector in 2017, the actions defined in the document have not been fully implemented. In Georgia the pandemic has strongly affected the energy sector, especially fuel combustion activities, which contribute 81% of total energy emissions. In particular, the immediate impact of the pandemic was a sharp cut in emissions from the energy industry, transport, and the commercial sector due to reduced economic activities, restricted mobility as a result of home officing, and declined air flights. Despite the apparent short-run positive impacts of the pandemic on climate change mitigation, the long-term implications remain unpredictable. It is likely that soon after the introduction of effective vaccines against the virus, partially revived air and road transport mobility due to the gradual opening of the tourism sector and reduction in home officing will lead to a gradual increase in greenhouse gas emissions in the atmosphere. The effect of the pandemic on greenhouse gas emissions from agriculture and LULUCF in Georgia also remain uncertain, both in the short and the long term. Since, according to GeoStat data, during the Covid-19 period, there was first an increase (in the second quarter of the year) and then a decrease (in the third quarter of the year) in the ownership of cattle and livestock, the short-term net emission levels derived from enteric fermentation in the animals’ bodies cannot be clearly measured. At a more general level, as the planned state budget for 2020 and the projected budget for 2021 consider increased expenditures for the agriculture sector as well for the conservation of biodiversity, the net greenhouse gas contribution of agriculture and LULUCF is hard to define. The potential post-crisis expansion of economic activities in agriculture and the increased resources towards conservation will impact emissions derived from agricultural processes8 as well as LULUCF-driven carbon removals9, with an uncertain net effect. While the pandemic crisis has adversely affected the demand structure of the agricultural sector10 and accessibility to agricultural inputs, reducing farmers’ incomes and the potential for sustainable agriculture development, the anti-pandemic crisis plan introduced by the government has already included agro-industrial assistance to counteract these effects, including some climate change mitigation measures. Nevertheless, the proactive incentive schemes directed towards the popularization of climate-smart agriculture practices, including sustainable crop, grazing, and livestock management, still necessitate additional attention in order to mitigate the impacts of the agriculture sector on climate change. Georgia  also needs to continue planning adaptation measures in the agriculture, health, and tourism sectors. If the 2° C global temperature increase limit is not achieved by 2030, Georgia as other countries is likely to be hit by adverse weather changes and natural disasters, which can threaten the lives of people and their economic security. In this case, the country will face the problem of food security stemming from the vulnerability of the agriculture sector, as desertification can eliminate opportunities for agricultural production inside and outside the country. Furthermore, drastic climate changes can be expected to put vulnerable people (low-skilled workers and the poor) employed in the local agriculture sector in extremely severe financial and economic conditions. Moreover, the healthcare sector might face another wave of zoonotic diseases, as a result of massive forest fires and corresponding changes in wildlife habitats. Besides, the increase in air temperature, activation of heat waves and decrease of precipitation might lead to an increased incidence of cardiovascular diseases. Finally, the tourism sector can potentially be hit again by unexpected events such as unfavorable temperature changes, with dramatic effects on businesses and individuals employed in the sector. Even though the adaptation strategy of the agriculture sector has been elaborated and climate change documents have been created for some regions, the health and tourism sectors still necessitate proactive planning for climate change resilience building, even though the businesses in these sectors adopt some adaptation measures in uncoordinated ways. Given the ambiguous and undecided future of the national climate agenda in the aftermath of the current economic and health crisis, and the expected drastic consequences of climate change on the most vulnerable communities, sectors, and on society as a whole, there is clearly room (and need) for proactive policy decisions, both in the direction of mitigation and adaptation. In this process, the government, non-governmental organizations, and local communities could play a crucial role. Specifically, the government could incorporate the following adaptation and mitigation measures in the sector-specific anti-crisis plans developed so far: • Introduce policies incentivizing a quick transition to cleaner energy technologies; • Introduce incentive schemes for the use of more energy-efficient material in the construction sector; • Stimulate industry and manufacturing sectors via tax benefits to implement new technologies for more environmentally friendly production processes; • Encourage and subsidize sustainable eco-friendly regional tourism development; • Popularize public transport, support sustainable urban planning, and encourage development of suburbs and small cities; • Subsidize the healthcare sector to develop and/or adopt effective treatments against climate change-driven diseases; • Introduce state programs supporting the employment of climate smart agricultural practices like technologies for dry-land management and production, arranging drainage canals for redundant waters, rehabilitating pastures and taking other sustainable agrotechnical measures. Simultaneously, different non-governmental organizations and local communities could be actively involved in the following mitigation and adaptation activities: • Increase media coverage of climate change related issues and raise awareness in local communities around the severity of long-term consequences of the climate crisis; • Increase awareness of farmers via an online platform or regional workshops to employ climate-smart practices and technologies in agriculture production and forestry (sustainable land use and management); • Train the low-skilled and poor farmers and workers11 in agriculture and LULUCF in resilience activities to grow climate-resilient trees, irrigate  the arable lands more efficiently, arrange windbreak belts to decrease erosion, develop small-scale irrigation systems, plant drought-resistant crops and vegetables, and improve living conditions for pasture watering in the period of droughts; • Cooperate with the government and the authorities to envisage the inclusion of marginalized and disadvantaged groups of society12 in all strategically important policy plans, to create climate-resilient communities and avoid the impoverishment of individuals employed in climate susceptible sectors like agriculture; • Support the economic empowerment of women in rural areas, and their participation in sustainable agriculture production and in the adoption of climate-smart agriculture practices, helping them to apply for the state program – Enterprise Georgia – which offers preferential conditions for female entrepreneurs. To summarize, the Georgian government now has the opportunity to adopt a forward-looking approach, directing the resources accrued from international donors and banks to tackle the COVID-related economic crisis to the sectors in need, with a strong focus on sustainability and on the mitigation of potentially irreversible adverse consequences of the upcoming climate crisis. For this purpose, the government should target both the key sectors contributing to climate change and the sectors that are the most susceptible to it. The active involvement and participation of green non-governmental organizations and local communities in this process is of the highest importance to improve the effectiveness of policy enforcement and the achievement of the SDGs.  [1] Agriculture and forestry.[2] In the first and second quarter of 2020, unemployment was persistently increasing in urban areas compared to the previous periods, while in rural areas the first quarter represented a negative trend while in the second quarter there was a slight recovery in the employment indicator.[3] The number of social assistance beneficiaries in September 2020 was the historic maximum for Georgia over 7 years.[4] Even though the state budget consists of resources for environmental protection, is does not indicate separate resources particularly devoted to either climate change mitigation or adaptation measures.[5] United Nations Framework Convention on Climate Change.[6] 30,000 CO2 equivalent Gg.[7] Land use, Land-Use Change, and Forestry.[8] Enteric fermentation, manure management, agricultural soils and field burning of agricultural residues.[9] Forest, crop and grass land management.[10] According to the Georgian Farmers Association, 60% of surveyed farmers could not sell their products because the HoReCa (food service and hotel industries) sector is closed.[11] It is worth noting that by 2019 more than 38% of the labor force was employed in the agriculture, forestry, and fishing sector, whereas the contribution of the sector to the total gross domestic product remained at a low 7.4%. This fact indicates that the-low skilled and poor members of society are mostly employed in the sector. The income generated in the sector remains very low over years, while it is always distributed over a large number of agriculture workers. Consequently, climate=driven productivity decreases in the sector might cause impoverishment of those people who suffer the most.[12]The low-skilled workers and the poor. See our article usage guidelines
Read more
Food Security and COVID-19 in Georgia
Giorgi Mzhavanadze answered Maestro TV’s questions about the Government’s de-dollarization plan. Giorgi evaluated a statement made by Minister Dimitry Kumsishvili about hedging in loan transactions and low level of financial literacy in Georgia. The best way of hedging is "natural hedging", which involves conducting business processes in a way that the currencies of cash inflows and outflows (revenues and expenditures) are matched. This enables the FX risk to be minimized. Then the researcher discussed the economic priorities of the Government for 2017. According to the first draft of the budget plan for 2017, infrastructural and social spending are the main priorities of the Government. Giorgi emphasized the role of acceleration of economic growth, which will automatically lead to de-dollarization and stabilization of the exchange rate. Watch the video from Maestro TV to learn more.