As European leaders pledged an aid package to save Georgia’s war-battered economy, some analysts said the war may have partly shielded this Caucasus mountain nation from the worst of the global financial downturn.
While the crisis has buffeted many smaller countries and emerging markets, Georgia may have had at least some good luck — by being among the first in what is now a long line of countries waiting for bailouts from international organizations.
“In some ways, this crisis that happened in August was a little bit ahead of the curve of the bad news,” said Thomas Lubeck, senior investment officer at the International Finance Corporation. “In some ways, it’s kind of a blessing in disguise.”
Analysts say Georgia might have faced a sharp economic slowdown from the global financial crisis anyway. But because of the timing of the August war, the influx of donor cash could keep the economy here afloat, at least in the short term.
“It’s a hard way to luck out, I guess, but there is a silver lining to the cloud,” Lubeck said.
The destruction of infrastructure and subsequent investor panic threaten to derail some of the benefits from the liberal economic reforms pushed through by Georgian President Mikhail Saakashvili after the 2003 Rose Revolution mass protests that drove former Georgian president Eduard Shevardnadze to resign following a discredited parliamentary election. These reforms had fueled a spectacular financial turnaround in what was once a corruption-riddled economy.
Economic growth averaged 10.5 percent per year over the last three years and reached 12.5 percent last year, World Bank data shows.
The US has already pledged US$1 billion for reconstruction projects, in addition to a US$750 million loan from the IMF. International donors in Brussels on Wednesday pledged more than US$4.5 billion, a figure that “exceeded expectations,” EU External Relations Commissioner Benita Ferrero-Waldner said.
An assessment by the UN and World Bank paints a sobering picture of the economic costs of the war. The document says concerns over the state of the economy appear to be well-founded.
Before the war, Georgia’s economy was growing at a rate of 9 percent annually, the report on the Georgia Relief Action Web site said. Now, it has dropped to 3.5 percent.
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