Georgian Experience of Economic Modernization: Achievements and Failures

Abstract

The article analyzes the causes, results and consequences of economic modernization reforms in Georgia in 2004–2013. The authors examine the starting positions of Georgia’s economy on the eve of reforms and study the main macroeconomic indicators of the country in different periods of its post-Soviet history. The purpose of the research is to identify both the strengths and weaknesses of Georgia’s economic transformation in 2004–2013, and to determine the sustainability of the results achieved. In other words, the question to be answered is whether the post-reform economic system of Georgia was able to withstand the changes in the foreign trade environment (in particular, the fall in prices for Georgia’s main export products – ferroalloys and copper in 2014–2019), and then the economic downturn caused by the COVID-19 pandemic. Having assessed the degree of success and effectiveness of the modernization reforms 2004–2013, the authors conclude that the results were contradictory. On the one hand, the tax reform proved to be highly efficient; significant success was achieved in the privatization of state property (both industry and land), as well as in the expansion of economic rights and freedoms of the population. On the other hand, the anti-corruption measures were only partially successful, as significant results were achieved only at the grassroots level, while systemic corruption (primarily in the higher echelons of government) remained the most serious problem of Georgian society and the state. Similarly, debureaucratization did not affect all sectors of the economy. Thus, while serious progress was registered in the spheres of services, trade and tourism, the debureaucratization and reduction of state regulation in agriculture and industry were less successful.