Economy

Issue #767

22.05.15 - 28.05.15

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Europe Wants Georgia. But Not Georgians

From the ISET Economist Blog (www.iset.ge/blog)

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Author:  Nino Doghonadze and Eric Livny

In March 2015, 31-year-old Tamar Trapaidze died of severe toxicity in Italy. Like many Georgian women of her generation, Tamar was an illegal immigrant employed as an in-home care worker by an Italian family. Being “illegal”, she must have feared deportation, which is probably why she was unable to receive adequate medical treatment.

Despite all the risks it entails, illegal immigration is a key survival strategy for many Georgian families. Since 2002, presumably the best period in Georgia’s recent history, the country has lost 14.7% of its population, mostly due to emigration. Remittances by Georgians abroad currently constitute 9% of the country’s GDP (as compared with only 2% in 2002), with the share of EU countries constantly on the rise (30% in 2014, mostly from Greece and Italy).

These facts are widely appreciated. What is less well understood, however, is that legal access to the European labor market represents the only channel for a tangible and immediate improvement in the lot of ordinary Georgian people (as opposed to those privileged few employed by Western-financed NGOs).

…legal access to the European labor market represents the only channel for a tangible and immediate improvement in the lot of ordinary Georgian people.

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Making Sense of the Census Results

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Author:  Eva Bochorishvili 

Galt & Taggart Research is partnering with Georgia Today on a biweekly column which will provide analysis of the latest macroeconomic developments in the country and its various business sectors, along with reports on the latest financial results of Georgian Eurobond issuers. This week’s topic: the latest census results.

The process of economic and political transition in Georgia is traditionally associated with success in governance and business reforms, but weak progress in reducing poverty. As a result of the successful reforms, Georgia has generated strong growth rates of Gross Domestic Product (GDP) for the past decade, averaging 6.3% annually from 2003 to 2014. Meanwhile, per-capita GDP, the most useful measure of living standards, jumped 4x to US$3,681 in 2014 from US$920 in 2003. These achievements are even more remarkable given the multiple crises Georgia has faced on its path of economic success – domestic and global crises, the 2008 conflict with Russia, and most recently, regional instability.

It is important to note that Georgia achieved the economic success without generating actual growth in employment – over 2003-2013 the unemployment rate remained in double digits, averaging around 15%, and job creation was weak, even in the double digit growth years. Capital and productivity in the manufacturing and service sectors were the major sources of growth. Job creation was restrained by a skills mismatch: Georgia’s labour market is dominated by low skill and low wage workers, with more than 50% of the workforce engaged in agricultural activities (mainly self-employed), while agriculture accounts for just 9% of GDP. At the same time, average wage earned in agriculture was only 1/3 of that in manufacturing, which employs only 6% of the workforce and accounts for 17.1% of GDP. Moreover, the poverty rate in rural, agricultural areas is 11.7 percentage points higher than in urban centers.

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