Fiscal policy after the parliamentary elections
Economic reforms announced in the run-up to the parliamentary elections in October 2016 raised concerns about whether Georgia was departing from its path of prudent fiscal policy. A reform of the corporate profit tax and increased infrastructure investment were driving expectations of a 6% of GDP budget deficit in 2017, endangering Georgia’s macroeconomic stability and its reputation with investors.
After winning the elections, the “Georgian Dream” coalition has undertaken significant efforts towards keeping the budget deficit at bay. The deficit in 2017 is now expected to remain at around 4% of GDP and to decrease in the coming years. This was achieved by increasing excises on goods such as fuel, cars, tobacco and gas and by further savings in administration expenditures. Immediate worries about Georgia’s economic stability are hence allayed. At the same time it is important to monitor the economic and the fiscal effect of the new fiscal measures in the coming years.
