C M Y K 12 HEADLINE NEWS & ANALYSIS FINANCIAL FactCheck 4 MAY, 2015 | FINCHANNEL.COM Bank of Georgia Received EUR 40 million from the Bidzina European Investment Bank Ivanishvili: The FINANCIAL By MADONA GASANOVA he European In- vestment Bank (EIB) is lending “In order to alleviate external EUR 40 million to Bank of Georgia, Tthe country’s largest bank, to shocks, the Government of finance investment projects promoted by SMEs and mid- cap companies. Georgia decreased the 2014 The EIB loan will support the implementation of proj- ects important for the devel- budget deficit.” opment of Georgia’s private sector as well as undertakings in the areas of social and eco- also decreased at the end of a positive outcome. Mariam CHACHUA nomic infrastructure, climate Mostly2014. Instead of a 5% growth Of FalSefurther note is the un- change mitigation and adap- FactCheck rate as planned, the GDP real even execution of the 2014 tation. As a result, the opera- growth rate is 4.8% according budget. In the main, infra- tion is expected to contribute to the preliminary estimates structural expenditure, fund- he depreciation of to job creation and mainte- of the National Statistics Of- ed principally by the foreign the national cur- nance. fice of Georgia whilst the debt, was in a constant state rency in Georgia “We are very pleased to nominal GDP equals GEL of lagging behind. At the end started in Novem- start cooperation with the 29,187 million. According to of the third quarter of 2014, ber 2014. GEL de- European Investment Bank, National Bank of Georgia Union’s bank. It is the only Tpreciated by 10% throughout the data of the National Trea- only half of the foreign debt especially in the light of Geor- and includes Privatbank’s bank owned by and repre- sury of Georgia, the budget was transferred owing to in- 2014 and dropped by another gia’s increasing economic market shares. The Bank of- senting the interests of the deficit in 2014 was GEL 863 complete project planning 15% (GEL 0.25) in the first and political ties with the fers a broad range of corpo- European Union Member million which constituted whilst GEL 478 million was two months of 2014. The de- EU, which has become the rate banking, retail banking, States. The Bank works close- 2.9% of the GDP. Therefore, transferred at the end of the preciation of GEL is caused by country’s largest trading part- wealth management, bro- ly with other EU institutions the budget deficit was indeed year. a high demand and a reduced ner. The Euro’s influence on kerage and insurance and to implement EU policy. decreased. We have to underline that supply of USD. Beginning the Lari has significantly in- healthcare services to its The operation brings the It must be noted that the when GEL started to depreci- from the second half of 2014, creased in recent years, with clients. As of 31 December volume of signatures for the decrease of the budget deficit ate rapidly in December 2014, the inflow of USD from the the Lari effectively becom- 2014, the Bank served ap- benefit of SMEs and midcaps was not a result of the deliber- the Government of Georgia basic sources of foreign cur- ing a euro proxy, as a result proximately 1.5 million client in Georgia to EUR 150 mil- ate actions of the Government did not reduce spending. On rency (tourism, remittances, of which we are now focused accounts through one of the lion. Total EIB lending com- of Georgia. The Government the contrary, in the last quar- exports) started to decrease on raising euro funding. This largest distribution networks mitments in Georgia amount of Georgia did not amend ter of 2014 budgetary spend- and this trend remains un- EUR 40 million loan, ear- in Georgia, with 219 branch- to EUR 530 million and con- the Law on Budget to slash ing started to accelerate. For changed until now. The bud- marked for financing our mi- es, the country’s largest ATM cern a number of other priori- budgetary expenditures as instance, in the period of get deficit spending at the end cro and SME customers, will network, comprising 523 ty sectors including transport, claimed by the Prime Minister January-September 2014, the of 2014 also contributed to enable us to further increase ATMs, 2.239 Express pay water and energy as well as of Georgia. The decrease of budget deficit was GEL 274 the depreciation of GEL. our competitiveness in the (self-service) terminals and support for SMEs and mid- the budget deficit was largely million which rose to GEL Bidzina Ivanishvili issued sector and support growth a full-service remote banking caps. caused by an incomplete ab- 863 million (by GEL 588 mil- a statement regarding the and job creation” said Irakli platform. sorption of expenditures. In lion) in the fourth quarter. Of depreciation of GEL and de- Gilauri, CEO of Bank of Geor- “A well-developed and ro- addition, the tax incomes part these amounts, the budget clared that in order to allevi- gia. bust SME sector is crucial of the budget was fulfilled deficit spending in December ate external shocks, the Gov- Bank of Georgia is the for economic growth and with a surplus and, conse- alone amounted to GEL 288 ernment of Georgia decreased leading Georgian bank, employment. This EIB loan, quently, the budget deficit at million which subsequently the 2014 budget deficit by based on total assets (with like similar loans the EIB has the end of the year was less contributed to the deprecia- GEL 300 million. a 35.5% market share), total extended across the Eastern than planned which in itself is tion of the national currency. FactCheck took interest in loans (with a 34.9% market Partnership countries, will the accuracy of the statement. share) and client deposits facilitate access to finance for According to budget projec- Chart 1: (with a 31.5% market share) the most vulnerable group of tion, a deficit of GEL 1,038 Budget Deficit in January-December 2014 as of 31 December 2014, all companies – SMEs and mid- million was planned for 2014 data based on standalone fi- caps,” said Wilhelm Molterer, and which constituted 3.5% nancial information filed by EIB Vice-President. of Georgia’s GDP. The budget banks in Georgia with the The EIB is the European plan was executed unevenly throughout the year. At the beginning of 2014, infrastruc- ture expenditures were lag- ging behind schedule whilst budget expenditures acceler- Ukrainian Crisis Costing Georgia ated at a very fast pace at the end of the year. The deficit spending of the budget was more than USD 300 Million one of the contributing factors to the depreciation of GEL. es, export and tourism from major sources of remittances Georgia’s GDP growth rate Continued from p. 4 Russia brought Georgia losses to Georgia. of USD 215,964,200. capital inflows through this The prolonged economic channel reaching a staggering recession in Russia holds CONCLUSION USD 5.936 billion since the much more danger for Geor- According to the budget projection, a deficit of GEL 1,038 million was planned for 2014 which year 2000. gia than any embargo Moscow constituted 3.5% of the GDP. At the end of the year, the actual budget deficit was GEL 863 During 2014 and January- could impose. The recession million which constituted 2.9% of the GDP. Therefore, the budget deficit in 2014 was indeed March 2015, money transfers affects not only certain Geor- decreased. However, the statement that the Government of Georgia deliberately decreased the from Russia amounted to gian products and producers, budget deficit is far from the truth. It has not made any corrections to the Law on Budget. The USD 797,553,200, down from but all export products, in- decrease of the budget deficit was caused by an incomplete spending for infrastructural projects 958,182,700 from 2013 and the vestments, the financial sec- and by surplus tax incomes. first quarter of 2014. The lost tor, and more importantly, it Of particular mention is the fact that when GEL started to depreciate rapidly at the end of the worth was USD 160, 629, 500. affects Georgian emigrants year, budget spending rose considerably. The budget deficit increased by GEL 588 million The reduction of remittanc- in Russia, who are one of the during the last three months of 2014. Of these amounts, the budget deficit rose by GEL 288 million in December alone which in turn contributed to the depreciation of GEL. Therefore, Bidzina Ivanishvili’s statement: “In order to alleviate external shocks, the Government of Georgia decreased the 2014 budget deficit,” is MOSTLY FALSE. MOSTLY FALSE The views expressed in this website are those of FactCheck.ge and do not reflect the views of The FINANCIAL or the supporting organisations C M Y K FINANCIAL HEADLINE NEWS & ANALYSIS 13 FINCHANNEL.COM | 4 MAY, 2015 FactCheck How the Age Structure impairs Davit “Inclusive Growth” Sergeenko: Minister of Health, Labour and in Rural Georgia Social Affairs of Georgia as transport, private house- culture], like providing ma- Continued from p. 2 hold employment, and trad- chinery to Georgian farmers “Prices of about 500 types of ing. The sample of the self- or incentivizing them to form Applying this theory to employed interviewed was cooperatives, but did not medications have increased by 15%- Georgian agriculture, most made up of about one-third lead to substantial productiv- economists would agree that of people above 60 years old, ity improvements. A lack of there are plenty of opportuni- while 24 percent of them were verve among Georgian farm- 20%..