Impact of public debt sustainability on the economic growth of Georgia

Abstract

The analysis evidenced that by 2018, the marginal indicators of public debt sustainability (public debt/ GDP, state debt/budget revenue and public debt/export) of Georgia remained below the thresholds. Despite this, the fiscal sustainability of Georgia may be threatened in the long-term perspective due to the different shocks (severe currency devaluation being an important factor among them), significant growth of the future social liabilities, growing scales of subsidies for different branches of economy and increasing gross external debt of Georgia (which already exceeds 100% of GDP). Without urgent adjustments in the fiscal policy, disclosures and management of fiscal risks, in the long term, the government of Georgia may find it necessary to drastically cut the budgetary expenses. The article emphasizes that the macroeconomic stability and stable economic growth of Georgia in the long-term perspective needs gradual adjustments of the fiscal policy.