$1.1 billion economic stimulus and social assistance package
By Natalia Kochiashvili
Friday, November 27
On November 26, the Georgian government presented a plan to alleviate the aggravated epidemic situation in the country, which envisages new large-scale restrictions.
Against the backdrop of the new restrictions, the government has also introduced a new economic stimulus, business, and social assistance plan that should reduce the economic damage caused by the restrictions.
According to Prime Minister Giorgi Gakharia, the newly imposed restrictions will reduce the country's GDP by an additional 0.7-0.8%, in line with the 5% reduction that the government had previously predicted.
According to the PM, the total cost of the economic stimulus package drawn up by the government is GEL1.1 billion. The economic package prepared by the government is as follows:
The Georgian government will cover all utility bills for 4 months. Starting January 1, those who have lost their jobs in the formal sector will receive GEL200 assistance for 6 months. A similar program was introduced by the government during the first wave of the pandemic, and it only applied to households that did not consume more electricity, water, or gas than the prescribed rate. The program cost the government about GEL270 million.
“In the conditions of the previous wave, 125 thousand people benefited from this assistance, we think that this wave will be about the same number,” he said.
According to him, the self-employed, under the imposed restrictions, will receive one-time assistance of GEL300 and will help them to defer state bank liabilities. This program will only apply to those citizens whose right to work has been temporarily suspended. We are mainly talking about self-employed people in the field of retail sales. Due to its highly targeted nature, it is expected that the program will benefit almost 50% of the citizens less than during the first wave of the pandemic. Out of the official 840,000 employees in the spring, almost 250,000 received a one-time compensation of 300,000, and this time their number will most likely be 120,000;
Like the previous program, from which 72 000 families received held, the families with 0 to 100,000 points, who have 3 or more minor children under 16, will receive a monthly allowance of GEL100 from the state for 6 months. In addition, GEL100 assistance for people with disabilities under 18 will continue for 6 months and cover 43 thousand people.
Extension of income tax exemption program for 6 months. In the first wave of the pandemic this program provided for full exemption from salary tax of up to GEL750, and taxation from salary up to GEL1,500 from the GEL750. During the first wave, 33,000 companies and 425,000 employees benefited from this benefit, which will cost the budget of about GEL260 million. According to the Minister of Finance, the government will try to launch the program in December.
The tourism sector will be fully exempt from property taxes in 2021. The sector will also be fully deducted from the deferred 4-month income tax. During the first wave of the pandemic, the government deferred both income and property taxes to the sector for 4 months. This time the government decided to write off the accumulated debt.
The government's decision to extend the benefits to the tourism sector will also apply in part to the restaurant business, as it has been found that the sector is severely affected. Among other benefits, the government will subsidize interest on bank loans to restaurants.
According to the PM, the economic crisis in Georgia will continue next year and 2021 is expected to be a difficult year.
“Timely activation and involvement of the parliament are very important in order to make the necessary legislative changes to support social and business,” Finance Minister Ivane Machavariani said at a briefing after the Coordinating Council meeting.
As Machavariani noted, it is necessary to start the budget review process in time. The government needs the support of the parliament because the legislative changes will require making such benefits as, for example, exemption from the property tax of the tourism sector in 2021. According to Machavariani, currently, this term expires on December 1 of this year and the government will technically extend this term until January 1.
“Before that, it must be strengthened by legislation. In general, in addition to the benefits that need legislative changes, next year's budget needs to be reflected in the subsidy and assistance programs we talked about, so it is very important to start discussing the budget and get the 2021 budget on time,” Machavariani said.
