SOME CRITICAL ASPECTS OF GEORGIAN FISCAL POLICY

So called “Great recession” and its consequences are one of the hottest topics in current economic affairs. The main problem of each state is to find solution to overcoming current economic slowdowns. The exporter economics are widely using monetary stimulus [currency devaluation] for keeping growth and expanding external markets. Reserve currency issuer states are using so-called “QE” programs for decreasing unemployment and encouraging economic activity. US Federal Reserve postponed planed ending of QE3. The ECB agreed to buy 60 billion euros a month in bonds to hold down interest rates and pump cash into banking system. The other states, which do not possess the same instruments, are trying to cope with problems by fiscal stimulus and austerity measures. Their policy is supported by the Keynesian views. In 2012 Federal Reserve Bank of San-Francisco released publication “Highway Grants: Roads to prosperity?” According to this research, in case of financing road constructions, fiscal multiplier is much higher than in the other cases. Moreover, the fiscal stimulus is four times more efficient during the recessions. 2008 was very difficult for Georgian economy - global financial crisis and war in South Ossetia occurred simultaneously. So, it was the biggest challenge for economic sustainability. During 2006-2008 average growth rate of Georgian economy was 26.04% and form 7.8 billion GEL reached 12.8 billion GEL. After the post-war year growth rates were halved and during 2010-2012 year the average rate was 13,9%, but it is rather impressive than we had in 2013-2014 years – only 1,87% average, hence there is emerging question about rapid declining of fiscal stimulus and increasing social burden on the state budget funds. Conducted analysis shows that efficiency of fiscal stimulus was decreased during 2013-2014. It means that we could show better economic performance despite trends of “Great Recession”. Federal Reserve System decision to postpone QE3 program needs more attention for planning future policy of economic stimulation. Low fiscal stimulus on national level and trends of global economic development urges to review current fiscal policy in favor of non-financial assets development.