GEORGIA From Reformer to Performer A Systematic Country Diagnostic
Main Messages Against the odds, Georgia has managed to achieve high and stable growth, thanks to a stellar reform track-record. Together with ambitious social policies, this has lifted many out of poverty. Signs of fragility have emerged: Demography is not on Georgia's side and the external environment is less benign. While macroeconomic performance has been strong, the fiscal headroom has shrunk. Productivity has faltered. What got you here won t get you there - Georgia needs to shift gears to extend past progress into the future by: o Unlocking the export engine by improving connectivity, which would also allow firms to grow and become more productive o Removing constraints to social mobility, by investing in people and skills creation, particularly in the rural economy o Fostering a sustainable environment for growth, with macroeconomic stability and enhanced environmental protection
A Strong Foundation to Build On
Per capita GDP(constant 2011 USD) GDP: Coming Back from Very Far, but Still a Long Way to Go 10000 Independence 9000 Civil war Stabilization and Early Reform Liberalization and pro-market reforms 8000 DCFTA 7000 6000 5000 Russo-Georgian War 4000 3000 Rose Revolution 2000 1000 Constitution & Lari introduction 0 1990 1995 2000 2005 2010 2015
Poverty Gains, but Sharp Contrasts Remain Rapid decline in poverty since 2010 Pockets of deep poverty remain A large share of the population is stuck in rural areas and engaged in unproductive activities Duality exacerbates effects of the demographic deficit
Georgia Can Eradicate Poverty But Vulnerability Will Remain a Challenge Vulnerable (> $1.90 <$11) Middle Class (> $11) Extreme poor (<$1.90)
Key Bottlenecks to Future Progress
Thousands A New Demographic Challenge 5000 4000 3000 2000 1000 0 2000 2012 2025-1000 Total population Working ages 15-64 Births 2012-2025 Deaths 2012-2025 Net immigration 2012-2025
Connectivity Hard and Soft Is a Binding Constraint 100 Global Connectedness score (1-100), 2010 and 2015 secondary road quality and air connectivity are top challenges 90 80 70 60 50 40 Mobile telephones (48) Fixed telephone lines (46) Roads (78) 150 100 50 0 Railroad (38) Port infrastructure (71) 30 20 Electricity supply (66) Air transp capacity (99) 10 0 Airport infrastructure (88) Armenia Estonia Georgia Moldova Source: Global Competitiveness Indicators, WEF. Note: Numbers denote position in the ranking. Best ranked =1.
Trade Facilitation and Logistics Fall Short of European and Global Standards Timeliness LPI Score 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Customs Tracking & tracing Infrastructure Logistics competence International shipments Singapore 2007 ECA 2016 Georgia 2016 Armenia 2016 Source: World Bank, Logistics Performance Index
Skills Hard and Soft Need Further Upgrading Major education quality issues in key subjects 100% 1% 1% 1% 2% 75% 34% 48% 38% 47% 31% 41% High Proficiency 50% Basic Proficiency 25% 66% 51% 62% 52% 69% 57% Below Basic Proficiency 0% 2009 2015 2009 2015 2009 2015 Science Reading Mathematics
Especially Soft Skills that Matter to Firms Literacy 16 Numeracy 21 Communication 21 Teamwork 22 Working Independently 23 Time Management 23 Technical Skills Problem Solving Creative Thinking Leadership English 11 26 27 29 32 32 28 38 33 30 40 46 54 % of firms reporting that graduates quite often and very often lack the skills 55 69 Soft skills for the new economy are missing 83 Secondary Education Graduates University Graduates
To Extend Past Progress, Georgia Needs to Shift Gears
More and Better Jobs Are Needed Too many Georgians are not working or employed in low productivity activities Wage workers: 0.7m (29%) Employed: Agriculture (12.6%) 1.53m (64%) In labor force: Self employed: 0.8m (35%) Non-Agri (6.3%) Working age population: 2.4m (100%) 1.77m (74%) Unemployed: 0.24m (10%) Unpaid (15.4%) Out of labor force: 0.63m (26%) Youth: 0.32m (13.5%) Disabled: 0.04m (1.7%) Other: 0.26m (10.8%)
Accelerating the Export Engine 200 Export of Goods and Services (% of GDP), 2016 180 160 140 120 100 80 60 40 20 0 Armenia Romania Georgia 2005 Georgia 2016 Macedonia Poland Latvia Bulgaria Estonia Singapore
Leading Sectors: Unlocking Potential Key opportunity Key Constraints Agriculture Value-Chain integration with EU via Turkey Value addition through tourism linkages Land fragmentation Internal connectivity Standards and compliance Apparel Upgrading for Cut-Make-Trim segment E-commerce for design Leverage DCFTA and FTA for market access Industry specific skills Trade costs Managerial skills Tourism Value chain upgrade Source diversification Vertical integration (backward / forward links) Internal and external connectivity Standards Hospitality infrastructure
Leveraging Brand Georgia : Pathways and Priorities
Georgia Can Enter the Prosperity Cycle
An Agenda for Action Top priorities: Unlocking productivity growth High priorities: Addressing economic dualism High priorities: Ensuring inclusive and sustainable growth Integration into Global Value Chains Equalizing access to opportunities and investing in people Preserving the environment Tackling hard and soft connectivity constraints Modernizing agriculture and leveraging tourism potential Maintaining sustainable fiscal and financial position Upgrading skills for the new economy
Growth: The Export Engine Integrate into Value Chains Upgrade Infrastructure Build Skills for the 21. century Switch from domestic to foreign demand Attract (more) FDI to promote efficiency gains & firm growth Extend early success in tourism and apparel Connective infrastructure, e.g. port of Poti Soft infrastructure (ICT, logistics) Focus on education quality and ECD Soft skills for the new economy Managed immigration
Social and Spatial Equity Bridge rural / urban divide in access to and quality of opportunities Maintain gains in health outcomes while addressing health hazards (e.g. Indoor pollution) Invest in people Modernize agriculture and leveraging tourism potential Niche products development Agricultural value-chains
Sustainability Integrated water basin planning Invest in environment quality monitoring Frameworks for sustainable use of forest and mining resources Preserve the environment Maintain fiscal balances and financial stability Fiscal consolidation and financial sector stabilization & deepening while Preserving social gains Improving spending efficiency
Thank you The SCD Team