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. Last Updated: 07/27/2016

Georgian Economy Showing Rebound

TBILISI, Georgia -- Georgia's crisis-hit economy is in its second year of growth, and a stabilization program has vanquished hyperinflation, but officials say the difficult stage of restructuring the economy is just beginning.

"The first stage of economic reforms, dealing with financial stabilization, has been mostly completed," said President Eduard Shevardnadze's aide for economic reform, Temur Basiliya. "Now the second stage, the most difficult, which will be the basis for economic growth, structural changes, is under way."

The energy system is being restructured, and transport and other industries would follow, he said this week.

Georgia was one of the most prosperous parts of the former Soviet Union. But its economy was badly hit by the Soviet breakup of 1991, conflict in Georgia's breakaway region of Abkhazia in 1992 and 1993, and civil war in 1993.

The International Monetary Fund endorses the local view that the economic picture finally is looking brighter.

"The inflation rate in Georgia is lower than expected, monetary and credit policy is successful, and the main thing is that economic growth of more than 16 percent has been registered," said visiting IMF official Mahommed Shapman Valavi. "But the important thing now is to regulate the question of tax revenues," he said.

Tax revenues amount to only 5 percent of gross domestic product. But rather than raise taxes, the authorities intended to improve their methods of tax collection, Basiliya said.

GDP in the first half of 1996 jumped by 16.6 percent from a year earlier, compared with a 14 percent year-on-year rise in the first quarter, the Department for Social and Economic Information said last week.

That compares with a 14.5 percent fall in the first quarter of 1995, CIS Interstate Statistics Committee figures showed. But the growth, which started in 1995, is from an extremely low base following a catastrophic fall in the preceding years.

GDP in 1995 was 2.4 percent higher than in 1994, but 74 percent down on 1991, and output last year was only 17 percent of 1988 levels, the CIS Interstate Statistics Committee said.

Deputy Economy Minister Nodar Ulumberashvili said recovery would continue in the second half of the year, though at a slower rate. Under an anti-crisis program to revive output in industry and agriculture, sowing volumes and production in key industries such as mineral water, wine and tea have risen.

Georgia also introduced a new currency, the lari, last October, which has held steady at 1.26 to the dollar.

Monthly inflation in April was a post-reform low of 1.2 percent, and foreign currency reserves have been built up to 186 million lari, or the equivalent of four months of imports. That compares with monthly price rises that hit 70 percent to 80 percent in recent years, and reserves in 1994 of near zero.