Irina Guruli, Deputy Director, EPRC
Introduction
2020 will mark the 6th anniversary after signing the Association Agreement (AA) and Deep and Comprehensive Free Trade Area (DCFTA) agreement between Georgia and the EU. It is an appropriate time to talk about preliminary results achieved so far and present recommendations for moving forward in this process of integration. Being a frontrunner in the DCFTA implementation process that now is the cornerstone for the economic reform process in Georgia, the position paper will have a look at the integration process from the economic perspective.
The economic crisis brought by the Covid-19 has proved the importance to build a strong and resilient economy through establishing strategic alliances; integration with the EU is meant to bring this resilience through consistent economic reforms and increasing social welfare by private sector development. The current crisis has vividly shown the vulnerabilities of the Georgian economy and the directions that need further focus.
Namely: 1) Georgia has a relatively low level of technological development, which limits the mitigation affect that has been achieved by a temporary shift to a new mode of work (low levels of digitalization in both public and private sectors), low levels of digitalization hamper proper provision of both public and private services distantly; 2) the economy is dominated by small enterprises and informal employment (half of the population is self-employed) without a formal stable source of income therefore in the times of crisis, social welfare worsens rapidly creating humanitarian crisis; SMEs lack access to technology, finance and skilled labor which will most probably make their economic revival harder; 3) 25 percent of the country’s Gross Domestic Product (GDP) is made up of receipts from tourism and remittances, both of these sources of income will see a drastic decrease this year, making the economic recovery quite problematic; 4) economy is dominated by trade and services sectors, which will suffer by both domestic and external shocks and will find it hard to overcome the crisis; 5) agriculture is expected to rejuvenate due to increased interest and efforts from the side of the population to harvest the land at their disposal; since manufacturing in Georgia is dominated by food products, beverages and metals, it is expected that this sector will also quickly overcome the crisis.
In the subsections below, an overview of various aspects of Georgia-EU trade and economic ties over the course of the past 5-6 years is presented. Analyzed tendencies will help us better understand the current stance of the economic conjuncture in Georgia, its strong and weak links, and the role of the EU in building and reforming the country’s economy.
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