To define the basic concepts of this topic, first of all, it is required to have a good understanding of two things: firstly, what is Сovid-19, and secondly, what is the economy.
Covid-19, the new pandemic disease, strongly affected world in many ways. This is new challenge. And it made people think and see things in different ways. Almost all fields throughout the world have faced up some kind of changes. And the reason why it is so exceptional between all other widespread diseases is that it is totally different from previous known ones such as swine or avian influenza. The disease itself spreads easily, people have no tools against of it, such as pills or other drugs, vaccines, this rises risks of fertility and that creates big treat. And because of those reasons mentioned above, WHO suggests as a prevention to keep social distance and stay home. Being home turned out to be unexpectedly harmful to economy. Everywhere in the news today the most popular words become Covid-19 and economy. Now, what is economy and why do people care about this so much? Economy is a Greek word and means ‘one who manages a household’. Economics is the study of how society manages its scarce resources. The official definition is an area of the production, distribution and trade, as well as consumption of goods and services by different agents. It is vivid now that the world around humanity is strongly linked to economy as it determines standard of living. Treat to economy treats standard of living as well. And that is the main reason why we care about it so much.
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Let’s discuss the things in more detail, generally for the world and specifically for Georgia. How it is linked markets and allocation of scarce resources to standard of living? Beside human factors health and life is important for economy as it affects productivity which is main determinant of living standards, as more labor is a guarantee of higher GDP (the reason why we care productivity) and healthy labor is a one character of productivity function (Y=AF (K, F, L, N), (Mankiw)). And staying home become necessary for health care. Some kind of jobs can not fit this new format which is working distance.
Primarily sectors such as restaurants, city malls, hotels, transportation and entertainment. Those are not able to work from home. And social distance made lines which is time consuming and bad according to microeconomics. And in fact, people become disabled to work this caused treat and employees started reductions more than 1000 people lose their jobs. And as economy is a market it is not now linked anymore. Almost all linkages are splinted. Because both supply and demand shock due to limited production, disrupted supply chains, social distancing, uncertainty and job loss (GALT & TAGGART).
It is reflected in Georgia as well. Taking into a consideration the fact that it is a country which has important transition/transition location on geographic map. Georgia country with emerging free market economy. As a definition “an emerging market economy describes a nation's economy that is progressing toward becoming more advanced, usually by means of rapid growth and industrialization” (https://investinganswers.com/dictionary/e/emerging-market-economy). At this level, what results can have Covid-19 on Georgian economy? Uncertainty makes it hard to predict, but some analysis still suspect that the global effect will be similar to the consequences of World War II. To determine (define and analyze) how strong effect would have this pandemic on country’s standard of living firstly should be defined pandemic situation; how well country copes with this challenge and then make it clear exactly what fields made loses.
As a determinant of coping status “Georgia stands out among the European crowd as a country that has coped unexpectedly well with the global pandemic” (Telegraph, 2020). Situation is under control and officials have taken measures against outbreak. Imposed state of emergency under which prohibited transportation, the learning process, cultural and sporting events, gatherings, economical activities, building processes (StopCoV.ge, 2020).
Meanwhile government took measures to mitigate negative impact on economy in Georgia. The most sensitive sectors exempted from taxes until November 2020; hotels will receive bank loan interest rate co-financing for 6 months from government; price subsidies will be imposed for 9 food products – rice, buckwheat, pasta, oil, flour, wheat, milk powder, sugar and beans; the National Bank eased banking sector regulations; moratorium of credit repayment for 3-month for borrowers; attracting funding from international financial institutions; Tbilisi City Hall exempted open cafes from paying rents in 2020, SMES are exempted from paying rents for 3 months (GALT & TAGGART).
But what is the meaning behind it? What consequences will it lead us? Several analysts have some ideas about this issue and it turned out that there are three possible scenarios of economic growth and each of them are dependent on the duration of state of emergency. In the most positive one economic resection will take place before June after which will start recovery. Probability of this case is 10% and if this kind of event will occur economic growth will be 2.1%. There is also mild way which is most likely to happen. If this pandemic disease will occur again in October, then Georgian economic growth will be negative and will achieve -2.7%; there is also third, pessimistic scenario that implies continued economic downturn from March, whose expectation is likely 40%, the case when there is nonstop virus spreading in the country which will cause even more downturn to economy depicted in the number of -6% (galtandtaggart, 2020).
Primarily the effect of regulations will imply on the truism and measured in billion dollars -1.2 in the first scenario, -2 in the second and -2.3 in the third one. The second most authoritative sphere that will get damage is export and the losses counted again in billion dollars correspondingly will be -0.2, -0.7 and -1. The third and fourth leading fields in Georgian economics also will experience loses remittances by -0.2, -0.2, -0.3 and foreign investments by -0.1, -0.2, -0.4; the total damage is assumed to be -1.7, -3.1 and -4.4 again this data are calculated for positive, mild and pessimistic scenarios in billion dollars compared with previous year’s situation (galtandtaggart, 2020).
Thus, it is obvious that general impact of Covid-19 on Georgian economy is negative. Meanwhile, it should be mentioned that the Covid-19 pandemic will cause reduction of imports by $1.7-2.6bn; break off of traveling that can depict in loose of amount $0.2-0.5bn; NBG interventions worth of $0.2-0.4bn; and minimum external borrowing $1.0bn (galtandtaggart, 2020).
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