Growth Diagnostics project applies the well-known methodological framework to uncover the binding constraints to economic growth in Georgia. The aim of this research project was to analyze all potential areas of economic reform in Georgia from credit markets to human capital to infrastructure, and thus produce a comprehensive assessment of reform priorities. The main conclusion of a previous constraints analysis undertaken by the Georgian Prime Minister's Office is that Georgia's growth hinges on continued investment in human capital (particularly in technical education) and infrastructure investment.
Our analysis and policy recommendations differed, quite dramatically, prompting a series of interesting meetings and exchanges with the Georgian Minister of Finance, and leading PM Office staff.
We argued that Georgia's growth is mainly constrained by a perception of instability political and otherwise driving up the cost of capital and preventing investment in low-risk-low-return projects of the kind that are important for productivity growth in the long run.