On December 20, in Radisson Blu Iveria Hotel Tbilisi, Economic Policy Research Center (EPRC) organized a presentation of two of its latest studies – (1) “An Economic Argument for Georgia’s Ascension Into The European Union” and (2) “Dynamics of Georgian Economy within the Foreign Trade Liberalization”. The studies were conducted within the frames of the project “Assessing Effectiveness of the EU Association Action Plan for Export Diversification”, which is funded by the“Open Society Foundation – Georgia”.
The aim of the first study “An Economic Argument for Georgia’s Ascension Into The European Union” was to outline the economic effects that EU ascension has had on countries that joined it between the years of 2004 and 2007, as well as to analyze the ways in which Georgia can stand to benefit economically by joining the EU.
The study showed that EU membership and integration supports:
European Union integration promotes innovation and creates jobs:
- For the twelve countries studied that joined the European Union between 2004 and 2007, trade (as a percentage of GDP) has grown more than 33 percent since 2000. For the non-EU Eastern Partnership countries studied, including Georgia, trade has only grown 2 percent since 2000.
European Union integration helps lower unemployment rates in its member countries:
- Since joining the European Union in 2004, new member countries have seen a 40.1 percent increase in expenditure on research and development, while non-EU Eastern Partnership countries have seen a 16.9 percent decrease in expenditure. The EU estimates that by investing 3 percent of GDP annually into research and development, 3.7 million jobs will be created.
Reducing unemployment rates:
- In the four years after joining the European Union, new member states on average saw a decrease in total unemployment rate from 10.1 percent to 6.1 percent. Over this same time period, Georgia’s unemployment rate increased from 12.6 to 16.5 percent.
European Union membership stimulates foreign investment:
- In four years after joining the European Union, new member states saw foreign direct investment inflows increase from 15.9 percent of GDP to 50.1 percent of GDP. During this time, non- EU Eastern Partnership countries saw a decrease in foreign direct investment inflows from 13.3 percent of GDP to 10.5 percent of GDP.
Joining the European Union helps to create a more sustainable “green” economy:
- Since joining the European Union in 2004, renewable energy consumption among new member states has increased an average of 56.9 percent. Over the same time period, Georgia’s renewable energy consumption decreased by 47.4 percent.
Some of the key findings of the second study – “Dynamics of Georgian Economy within the Foreign Trade Liberalization” revealed that:
- Georgia experiences gradual, evolutionary increase in exports; Export markets are diversified, however, main markets change annually, which represents a challenge for Georgian business to establish ties with a stable market.
- As a result of DCFTA, there was a rapid increase in Georgian exports to the EU, which was gradually stabilized. Ratio of exports in the EU during the past several years, as part of overall Georgian exports vary from 27-31%; Georgia is not expected to see immediate economic shifts in exporting goods and products within the short-term period.
- In contrast to the EU, trading with the Commonwealth of Independent States(CIS) countries is less stable, due to fluctuating local markets.
- The growth of Georgian exports are strongly affected by foreign exchange rates, macroeconomic factors or other types of on-going processes on international markets.
- Types of exported goods is increasing, however the process is slow, as Georgia does not produce large amount of high-tech products, which needs considerable investments, time and economic conditions.
- Exported goods and products are more diverse in the EU markets, in contrast to the CIS countries – where mainly the so-called “traditional” sort of products are being exported (including alcoholic beverages and mineral waters).
***Studies were prepared by Economic Policy Research Center (EPRC) within the frames of the project “Assessing Effectiveness of the EU Association Action Plan for Export Diversification”.
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