RECOVERY OF ENTREPRENEURIAL BUSINESS: PRINCIPAL ELEMENT OF STABILITY OF REAL ECONOMY: MAIN SOURSES OF ITS INVESTMENT PROVISION

TENGIZ EZUGBAIA

After the beginning of reforms, economic policy of Georgia was aimed at achieving financial stability in the conditions of a general line of radical transformations as a result of which a trend of inflation rates reduction to a stable low level was clearly observed.

However, stability of the given movement that is provided mostly by means of money and credit policy, remains insufficiently steady with there being no vital structural movements in real sector of economy.
The main task of stabilisation in the new stage is real rehabilitation of production, creation of conditions for saving and reproduction of capital in real (industrial) sector of economy.
The given circumstance requires performance of efficient macroeconomic policy with priority being paid to an investment one. As far as we know, a state has significantly reduced its participation in investments sphere. The overcharge of credit resources is unacceptable to real sector of economy. Investments in industrial sector are less attractive for banking capital and other financial institutions, mainly, because of lengthy dates of payback and high capital coefficient of production. Potential investors prefer to invest financial assets in safer and more lucrative assets. Private capital and population’s savings cannot serve as long-term credit resources as they have short-term nature and constitute an unstable source. Thus, economic life of production and financial sectors of Georgia’s economy depend much on the efficiency of foreign capital use in the economy of the country. Inflows of foreign capital investments (in the form of direct investments) are vitally important for achieving medium-term purposes such as aversion of modern crisis, initial economic revival. Their multiplication effect can activate virtual investment cycle, which will have a positive effect not only on production, but also on other sectors of economy (“dragging” effect for agriculture and “pushing” one for sphere of service).
Thus, stability of economic growth and national competitiveness will depend on the volume of Georgian export, engineering production, industrial goods, high-tech and scientific products. A future policy should be aimed at the current industrial base and use of its potential. Policy of investment encouragement, industrial policy and policy of external trade development should be co-ordinated within the frames of approach of general economic policy towards a new stage of stabilisation – stage of real stabilisation and formation of incessant economic growth.