OCT. 2 2015 (The Conway Bulletin) – Annualised inflation in Georgia in September measured 5.2%, the Georgia statistics service said, a small drop from August. The main driver of inflation has been a rise in the price of electricity, alcohol and cigarettes. Last month the Central Bank increased interest rates to try to beat rising inflation.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015 (The Conway Bulletin) – Georgia ended their Rugby World Cup with a 17-16 victory over Namibia, earning their second win in the tournament. This is and the only time that Georgia has won more than one match in a World Cup.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 5 2015, TBILISI (The Conway Bulletin) — Signalling that a regional economic crisis is worse than it had thought, the Georgian finance ministry said it would scrap a flagship policy that would have cut corporation tax and encouraged business growth.
The Georgian Dream government said earlier this year that it wanted to copy an Estonian tax policy that scrapped corporation tax on profit re-invested into businesses in order to generate more growth. The downside was that, in the short term at least, tax receipts would also drop.
And now, at a meeting to discuss the government’s proposed budget for 2016, deputy finance minister Giorgi Kakauridze said that plans to introduce the tax cuts this year had been pushed back indefinitely.
“This is quite a difficult process, fraught with quite a lot of risk,” media quoted Mr Kvirikashvili as saying. “Yes this [model] has its positive sides, but there are lots of negative aspects as well, so it has to be thoroughly considered. No final decision has been made in which direction this reform will go.”
The bottom line is that Georgia’s budget relies heavily on corporation tax. To cut this tax now, with the economy worsening, would be fool- hardy, the government appears to have decided.
Analysts, though, were scathing and said the tax reform should never have been discussed in the first place.
“It is not the first time Georgian Dream has promised changes they’re unable to keep. They should have known that the economic crisis would make this reform a bad idea.” said Giorgi Aptsiauri, economist at the Georgian Institute of Politics. “Income from corporation tax is a large part of the budget. They can not afford a cut in revenue with the current economic situation.”
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 2 2015 (The Conway Bulletin) – Tourist numbers to Georgia are rising, the government said when it issued new data which showed that revenue from tourism rose to $430m in the second quarter of this year — a 6% increase from the same period in 2014. The government has been promoting Georgia heavily as a tourist destination.
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(News report from Issue No. 251, published on Oct. 9 2015)
SEPT. 30 2015, TBILISI (The Conway Bulletin) — Real estate prices in the Georgian capital have fallen by 15% this year, a drop that industry insiders blame on the collapse in the value of the lari currency.
In an interview with The Conway Bulletin, Anna Jalagonia, president of the Georgian Association of Realtors, said a 40% fall in the lari since last summer had spooked foreign investors.
“Investors prefer to wait because of the unstable situation in the country,” she said.
This bodes badly for Georgia, whose economy is to a large extent dependent on foreign investment.
Like the rest of the region, a slump in oil prices and the sluggish economic performance of Russia, the region’s main driver, has undermined Georgia’s economy. The Central Bank has spent millions of dollars trying to protect the value of the lari, inflation is rising and GDP growth rates are being revised down.
Neli Goguadze, director of the real estate agency Kibe, said that the situation in Georgia’s real estate sector had reached a tipping point.
“The problems began a few months ago due to the devaluation of the national currency,” she said. “For there to be a revival, the market needs a serious boost.”
Last month, the Central Bank increased its key interest rate to 7%, it’s highest rate since December 2011, as it tried to support the lari.
But some real estate analysts said that this interest rate increase may actually cause more problems.
“Real estate transactions are usually made in US Dollars,” said Papuna Kokhtashvili, owner of the Georgian franchise of US-based RE/MAX Property Advisors. “The increase in interest rate for loans results in a reduction of demand for property.”
And is could get worse, as Ms Jalagonia of the Association of Realtors explained during her interview.
“At the end of the year the situation will be worse as the national currency rate will continue to influence the market and winter and the fall are usually slow times for real estate acquisition. That combined will be a problem,” she said. “Prices for residential real estate have already fallen by about 15% and will continue to decline.”
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(News report from Issue No. 250, published on Oct. 2 2015)
OCT. 2 2015 (The Conway Bulletin) – The imprisonment of a former mayor of Tbilisi from the opposition United National Movement (UNM) has underscored fears that Georgia’s governing Georgian Dream (GD) is using the judiciary to settle scores.
Gigi Ugulava’s conviction came just after the Constitutional Court ruled that holding him 14 months in pre-trial detention was unconstitutional and set him free. Twenty-four hours later a court convicted him of using his position to give out hundreds of jobs to UNM loyalists and sentenced him to 4.5 years.
A former youth leader representing the “new guard” that brought Mikheil Saakashvilli to power after the Rose Revolution, Ugulava entered the mayor’s office before he turned 30. After the GD’s victory in parliamentary elections in 2012, he was forced from office in December 2013 amid accusations of misuse of funds.
The conviction of Ugulava is a harsh blow to the UNM in advance of the pivotal October 2016 parliamentary elections, a repeat of the 2012 contest that toppled Saakashvilli and eventually led to his leaving the country and his citizenship rather than face criminal charges.
Like a number of UNM officials, Saakashvilli is now plying his reformism for the new Western darling Ukraine, where he is now governor of Odessa.
Saakashvilli’s energetic reformism in Georgia produced massive overhauls in public administration and policing that are still considered among the best in the non-Baltic former Soviet Union.
But his centralization of power and demonisation of opponents, including through Ugulava’s position as head of the capital’s administration, eventually sparked the Georgian Dream backlash.
Georgia is grappling with the problem common across Eurasia of how to consolidate rule of law after a transition in government.
Uprooting corruption may well require prosecuting former officials, but it is hard to escape the sense that GD is repaying UNM its own repression in kind, rather than building a common polity where diverse parties can compete without fear of persecution if they lose or fall out with the ruling elite.
The cycle of accumulation, revolution, and persecution appears on track to continue which is bad news for Georgian democracy.
By NateSchekkan, programme director at Freedom House
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(News report from Issue No. 250, published on Oct. 2 2015)
SEPT. 29 2015, TBILISI (The Conway Bulletin) — A village in Georgia’s Pankisi Gorge, a Muslim area that retains strong links to the North Caucasus, has elected a woman as its leader, media reported.
The election of school teacher Tamar Margoshvili, 55, as head of Duisi village is notable because traditionally only men could lead the village.
“I am not any less skilled compared to the men of the village,” media quoted Ms Margoshvili as saying.
Ms Margoshvili’s promotion is a victory for modernisers who will be heartened that a woman has been able to break through one of the most traditional societies in Georgia.
Renata Skardžiūtė, political scientist at the Georgian Institute of Politics said: “Women started gathering in clubs in different villages, then managed to create women’s council of elders, something quite unprecedented in Muslim communities.”
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(News report from Issue No. 250, published on Oct. 2 2015)
SEPT. 29 2015 (The Conway Bulletin) – Georgia energy minister Kakhaber Kaladze met up with Gazprom chairman Alexei Miller in Brussels to discuss Georgia’s role as a client and transit country for Russian gas. Media didn’t give details of the meeting but it did speculate that Georgia may be looking for help from the Kremlin to fill its energy deficit.
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(News report from Issue No. 250, published on Oct. 2 2015)
SEPT. 29 2015 (The Conway Bulletin) – Keen to further burnish its Western orientated credentials, Georgia said it would sign up to the NATO Response Force (NRF). Georgian PM Iraki Garibashvili said that Georgia would create a unit of 100 soldiers for the force which is designed to deploy rapidly to protect NATO members. Finland, Sweden and Ukraine are other non-NATO NRF members.
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(News report from Issue No. 250, published on Oct. 2 2015)
SEPT. 30 2015 (The Conway Bulletin) – Preliminary GDP data for August showed that growth in Georgia measured 2.3% compared to the same month in 2014, the Georgia statistics agency said. This was the slowest year-on-year GDP growth since May.
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(News report from Issue No. 250, published on Oct. 2 2015)