Sectoral analysis of the economic model of Georgia (საქართველოს ეკონომიკური მოდელის დარგობრივი ანალიზი)

Abstract

This paper aims to study the efficiency of the economic model of Georgia through investigating its sectoral development. This is the first study that analyzes annual financial statements of more than 500 large private sector entities of Georgia. The financial data have been officially withdrawn from the Supervision Service, and descriptive data (firm category, identification code, and the sphere of operation) have been automatically downloaded from the official website of the Supervision Service (www.reportal.ge) using artificial intelligence techniques. The investigated sample entities operate in one of the following four areas: manufacturing, retail, services and finance. The author looks at this information in terms of the number, size and profitability of the entities. The results show that the smallest number of entities (19%) operates within the manufacturing sector. This already raises the doubt that Georgia’s economic model is rather inefficient. By looking at the size of the entities, the work further detects that the financial sector stands for the largest sector. The difference between the size of the finance sector players and those within the other sectors is so evident that this may only strengthen the above risen doubt on wrong economic pattern of development. In terms of profitability, it is further revealed that trade and service sectors are the leading ones. In other words, there are fewer and smaller sized entities operating within the manufacturing sector, which are likely to be less focused on high-tech production and thus are earning relatively lower income margins. It is recommended that the government agencies prioritize the growth of enterprise involvement within the manufacturing sector, which may potentially serve as a basis to move towards the introduction of knowledge-based, high-tech manufacturing paths in the medium- and long-term perspective.