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Georgia ‘13th freest economy in the world’

16 February 2017

Georgia ranks 13th in the world in economic freedom, according to the Index of Economic Freedom, an annual guide published by conservative American think-tank the Heritage Foundation. Meanwhile, Armenia came 33rd, Azerbaijan 68th, with Russia lagging behind at 113th, the third worst in Europe. Countries were scored from 0 to 100 in 12 components of economic freedom, with the average scores making up the country’s final ‘economic freedom score’.

Georgia, at number 13 worldwide, with an overall score of 76/100, came in first in the Caucasus, and fifth in Europe, behind Switzerland, Estonia, Ireland and the UK, and was assessed to be ‘mostly free’.

According to the Index, Georgia’s government has maintained strong momentum in liberalising economic activity while taking steps to restore fiscal discipline. ‘Public debt and budget deficits remain under control. Open-market policies, supported by competitively low tax rates and regulatory efficiency, have facilitated flows of trade and investment. Large-scale privatisation has advanced, and anticorruption efforts have yielded some notable results’, the document reads.

The Index singles out Georgia’s fiscal policy, regulatory efficiency, and open markets as notable successes. Areas of concern, according to the report, are property rights, judicial effectiveness, and government integrity.

Armenia, ranked 33rd worldwide with the an overall score of 70/100 came second in the Caucasus, and 19th in Europe, and is considered ‘mostly free’ as well.

According to the Index, considerable diversification of Armenia’s economic base has increased economic dynamism, and a decade of strong economic growth has reduced poverty and unemployment rates. ‘Although Armenia performs relatively well in many categories of economic freedom, more reforms are needed to enhance judicial independence and government transparency’, the research says. According to Heritage Foundation, despite progress in tackling corruption, particularly in the tax and customs administrations, close relationships within political and business circles raise concerns about cronyism and undue influence.

The Index praised Armenia’s government size, trade freedom, and investment freedom as notable successes. The concerns, according to the report, were the same as in Georgia, property rights, judicial effectiveness and government integrity.

Azerbaijan, at 68 worldwide, with the an overall score of 64/100, came third in the Caucasus, and 15th in the Asia-Pacific region , and is considered ‘moderately free’.

Openness to global trade and investment, supported by some improvements in regulatory efficiency, have aided Azerbaijan’s transition to a more market-based economic system, the Index writes. According to the survey, continued transformation and restructuring are needed to capitalise on the well-educated labour force and broaden the production base. Economic growth has been driven mainly by development of the energy sector.

Nevertheless, challenges to diversification and sustainable growth remain substantial. Deeper systemic reforms are critically needed to advance and institutionalise economic freedom more firmly. Despite some progress, property rights are weak, and corruption remains widespread. State involvement in banking is still excessive, and lingering financial instability adds to uncertainty, the Heritage Foundation argues.

Russia, ranked 114th in the world, with an overall score of 57/100, came last in the Caucasus region, and 42nd in the Europe, behind only Greece and Ukraine, and is judged as ‘mostly unfree’.

The Index states that Russia’s economy is severely hampered by blatant disdain for the rule of law and for the concept of limited government. The private sector remains marginalised by structural and institutional constraints caused by ever-growing government encroachment into the marketplace. ‘Rising inflationary pressure jeopardizes macroeconomic stability. Large state-owned institutions have increased their domination of the financial sector at the expense of private domestic and foreign banks’, the document reads.

It was also mentioned that an inefficient public sector dominates the economy. According to the publication, the risk of state meddling in the private sector remains high in Russia’s repressive political environment. ‘The judiciary is vulnerable to corruption, and the protection of property rights remains weak, undermining prospects for dynamic long-term economic development’, the Index states.

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