Kakha Bendukidze: Government initiatives adversely affected economy

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The founder of Free University, Kakha Bendukidze, talking on Rustavi 2 TV channel on 18 January, said that the legislative initiatives of the Georgian government adversely affected the country's economy as well the talks that inflation contributes to the development of economy.

"I have no idea where the opinion that inflation will contribute to the economy comes from. Perhaps, this is something which can be said by only those people who read books of the 20th century alone. There is hardly a reasonable economist today who would say that inflation helps economy develop. This is a myth. From the macroeconomic standpoint, this opinion has no justification in economic terms.

"The depreciation of [national currency] lari is of course an unpleasant development and more fundamental decisions need to be taken in this regard. From 2004, Georgia implemented many reforms and as a result, we obtained a certain type of economic vehicle which was bequeathed to the new government. Through the [parliamentary] elections [in October 2012] a new driver was elected for that vehicle. This driver had two options – either to carry on driving this vehicle in the same direction or to instantly start transforming it. The problem is that instead of keeping on driving the driver started transforming the vehicle.

"All those legislative initiatives that were implemented last year brought nothing but a negative effect to the economic growth. Against this backdrop, the 3% economic growth can be considered a success for Georgia. A sense was created that this vehicle will be repeatedly transformed... This does not boost trust among business. This causes huge uncertainty among businessmen and especially, among foreign investors. The legislative activity must be very restricted. The prime minister must control that himself, otherwise there will be turmoil.

"As regards inflation, I do not expect significant rise in inflation. Prices may increase on certain products but the overall inflation will be more or less stable. If the Georgian government drops transforming this vehicle, there is a chance for our economy to continue to move towards development," Kakha Bendukidze said on Rustavi 2's Business Courier program.

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