RONDELI BLOG

Georgia’s Application for European Union Membership

2021 / 02 / 24

Valeri Chechelashvili, Senior Fellow at Rondeli Foundation
 

It is undoubtable, that a declaration of intent to apply for European Union membership is itself a very serious act. It is based on certain positive developments: Association Agreement (Deep and Comprehensive Free Trade Area being integral part of it) with the EU was signed in 2014, visa free regime for Georgian citizens travelling to EU was introduced, EU became Georgia’s biggest trade partner etc. At the same time this intention raises many related questions. Have there been consultations with Brussels on the subject of this intention? Will such an application be well received in 2024 by EU member states and agreed in advance with the European Commission? What about EU fatigue concerning enlargement process? Will the application be made before or after the 2024 Georgian elections? If it is submitted before the elections, then what about the incomplete parliament, which is currently assessed by the overwhelming majority of political parties as a single-party one? How can these challenges be met? Will the application for EU membership be made before Georgia will receive NATO Membership Action Plan? It should be borne in mind that all new members of the EU, as a rule, first became members of NATO. Or is NATO membership no longer a priority? Will the application be made in coordination with other members of the Eastern Partnership, Associated Members Ukraine and Moldova, or alone? With what level of economic development and quality of social status do we want to approach this historic day?

It is unrealistic to find an answer to all these questions in one publication. The aim of this article is instead to explore the factor of economic development.

It is indisputable that among other reasons, with current level of economic development of Georgia chances for the successful application are rather limited. There is too big a gap between the economic development level of Georgia and that of the weakest economy of the European Union - Bulgaria. What is worse, the dynamics of this development are not in Georgia's favor either. If the Government of Georgia is unable to radically improve this dynamic in the coming four years, one can forget about the seriousness of intentions to apply for European Union membership. In order to understand whether the government formed alone by the “Georgian Dream” party can face this challenge, we can compare the level and dynamics of the economic development of Bulgaria and Georgia in the period of 2012 - 2020.

 

GDP volume (bln. USD)

Source: https://knoema.com/atlas/Bulgaria/GDP?compareTo=GE

 

2012

2013

2014

2015

2016

2017

2018

2019

2020

Bulgaria

54.01

55.59

56.88

50.63

53.78

59.07

66.27

67.93

67.92

Georgia

16.49

17.19

17.63

14.95

15.14

16.24

17.60

17.74

16.32

 

GDP per capita (USD)

Source: https://knoema.com/atlas/Bulgaria/GDP-per-capita?compareTo=GE

 

2012

2013

2014

2015

2016

2017

2018

2019

2020

Bulgaria

7415

7673

7898

7077

7573

8379

9466

9772

9826

Georgia

4410

4623

4742

4018

4061

4359

4719

4765

4405

Government gross debt as a share of GDP (%)

Source: https://knoema.com/atlas/Bulgaria/Government-gross-debt-as-a-share-of-GDP?compareTo=GE

 

2012

2013

2014

2015

2016

2017

2018

2019

2020

Bulgaria

16.6

17.2

26.4

25.4

27.1

23.0

20.1

18.6

24.1

Georgia

33.5

32.5

33.3

38.8

42.2

40.8

40.0

42.6

58.7

 

Unemployment (%)

Source: https://knoema.com/atlas/Bulgaria/Unemployment-rate?compareTo=GE

 

2012

2013

2014

2015

2016

2017

2018

2019

2020

Bulgaria

12.4

13.0

11.5

9.2

7.7

6.2

5.2

4.2

5.6

Georgia

17.2

16.9

14.6

14.1

14.0

13.9

12.7

11.6

n/a

 

Inflation (%)

Source: https://knoema.com/atlas/Bulgaria/Inflation-rate?compareTo=GE

 

2012

2013

2014

2015

2016

2017

2018

2019

2020

Bulgaria

2.4

0.4

- 1.6

- 1.1

- 1.3

1.2

2.6

2.5

1.2

Georgia

- 0.9

- 0.5

3.1

4.0

2.1

6.0

2.6

4.9

5.3

 

In the period 2012 - 2020. Bulgaria's gross domestic product, in terms of volume and per capita, grew by a quarter, while similar indicators in Georgia slightly decreased. The public debt ratio to gross domestic product in Bulgaria increased from 16.6% to 24.1%; in Georgia from 33.5% to 58.7%. The unemployment rate in Bulgaria decreased from 12.4% to 5.6%, and in Georgia from 17.2% to 11.6% (in 2019, data for 2020 is not yet available). Inflation rates in Bulgaria decreased from 2.4% to 1.2% in the said period, while in Georgia they increased from - 0.9% to 5.3%. The government’s gross debt as a share of GDP in Bulgaria is 24.1%, while in Georgia it is 58.7%. The picture is clear enough: over the period under review, Georgia's lag behind Bulgaria in all dimensions has only increased. Could it be otherwise? Yes, it could. This becomes clear if we analyze the parameters of Georgia's economic development since 2003.

As a result of the radical reforms introduced by the Government of President Mikheil Saakashvili, the country's economy began to develop dynamically. Every year, the country began to improve positions impressively in different world rankings. Infrastructure projects began to be implemented - road construction, energy supply, water supply, foreign direct investments began to flow; centers of economic development as alternative to the capital of the country began to appeare. Part of this process was the dispersal of political institutions: the Constitutional Court moved to Batumi, the Parliament to Kutaisi, etc.

It is impossible to build the future without a fundamental analysis of the past. Regardless of political preferences, such an analysis will help to understand where Georgia could be today, and how close it could come, at least in terms of economic indicators, to the ambitious task of applying for European Union membership. Two small tables will assist us in clarifying the situation.

GDP of Georgia in the period of 2003 – 2019 (bln. USD)

Source: https://tradingeconomics.com/georgia/gdp

2003

2007

2012

2016

2019

3.99

10.17

16.49

15.14

17.74

 

GDP of Georgia per capita in the period of 2003 – 2019 (USD)

Source: https://www.geostat.ge/media/27810/Mtliani-shida-produqti-2018-celi-dazustebuli%28geo%29.pdf

2003

2010

2012

2019

1070

3232

4422

4763

 

The tables confirm that assuming the trends of economic development accumulated by the country in the period of 2003 - 2012 had stayed in picture, today we would be in a completely different position. This didn’t happen. Unfortunately, the most accurate term that can be used to describe the situation in the Georgian economy from 2012 to the present day is “stagnation”.

It is clear that in 2003 the level of the gross domestic product was low. From 2003 to 2012, GDP quadrupled; the surplus was $12 billion. If we had grown fourfold over the next nine years, we would now be approaching a GDP of $ 50 billion. Perhaps an impossibility, but it was quite possible to double the GDP to $32 billion, or at least to increase it by the same $12 billion, to the level of $28 billion. Even in the latter case, today the level of economic development of our country would be comparable to that of Bulgaria with all the respective consequences. For example, the basic pension and minimum wage could be doubled what it currently is, in dollar terms.

A sufficient GDP is a solid argument for European Union membership application. The comparability of the level of economic development with even the weakest economy of the organization will make such an application more credible. For this dream to come true by 2024 our country has to perform an economic miracle.

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