AFBA” links the unfavorable state of economy to national bank’s policies

The association of young financier and businessmen – AFBA held a briefing at for.ge-s press club, where the president and members of the organizations discussed unfavorable state in economic field and deflation processes, with the concern of national bank’s improper activities’ improvement.

 According to Nodar Chichinadze, the economic state of the country over last period, especially after economic growth sank and became negative, has become a topic of active discussions. However, the discussion of economic growth is mostly politically motivated and in most cases, it casts the economic analysis aside. Economic growth rate in first quarter of 2013 has been 2.4%, which, compared to the same period of previous year, is less by 4.3%. The fact that country underwent such processes is, undoubtedly, a negative sign, but young financiers consider that discussing this issue in political aspect will not bare any results and will additionally harm economic situation – states Chichinadze.

 He also mentioned that during political debates, in most cases old and new governmental power try to make each other responsible for negative economic growth while not even mentioning the role of national bank and its responsibility for on-going deflation process. \"The main function and task of national bank, which is also determined by \"The Law of National Bank”, is to provide stability of prices, however, national bank is, in fact, unable to perform this and during last 2 years, prices through the country have been fluctuating between two digit inflation and deflation. I.e. national bank periodically \"sets” the prices on either of the extremes and the targeted inflation is not being achieved. As a result, the economy is suffering and young financiers consider that the decrease in economic growth is the consequence of deflation that has been continuing for 18 months already and national bank still is unable to restrain. We would like to remind you May of 2011, when inflation coefficient went up to 14.3%, national bank could not restrain this situation and took measures of opposite extreme – deflation. For the process not to become more grievous, immediate measures have to be taken to overcome deflation and achieve positive indicator of inflation. Despite the fact that national bank periodically decreases refinancing rates, the process does not hold desired results. National bank either does not, or cannot use other available tools – explains the president of association.

 It is to be noted, that many countries throughout the world are fighting deflation nowadays and to stimulate the economy, they are trying to raise the prices. USA, Japan and other developed countries use the policies for raising money supply, which if studied and shared, will bare positive effects for Georgia.

\"AFBA” considers that the hindering factor for economic growth is a small monetary base, money deficit in economy, i.e. there a low level of monetization. The coefficient of monetization (M2) in Georgia is 14,6%, when average index of the world is 129,9% (according to statistics by World Bank).

 According to \"AFBA’s” evaluations, comparably fast pace of economic growth during the last years was triggered by perfect accounting of administrative and economic activities and state’s high level of involvement in economy. Nowadays, when these factors have less of an influence, the problems affecting economic growth were clearly revealed and young financiers consider, the main problem lays in the low level of economic monetization.

 According to the vice president of \"AFBA”, Shot Gulbani, it is desirable to share the experience of USA, where the government addressed so called \"Quantitative Mitigation” policy, which involves purchasing bonds of central bank and investment of a certain amount in the economy as a security, central bank will purchase bonds from commercial and other private banks, carrying out an emission of new money. As a result, bank reserves increase, prices of the bonds, as well as their profit goes down – states Shota Gulbani.

 The effectiveness of quantitative mitigation policy is already been confirmed and experienced and implementing it with consideration of Georgian financial market situation will not only increase the inflation towards desired level, but would also support the expansion of banking loans and increase of economic activity.

 Thus, \"AFBA” considers that with the given circumstances, the role and responsibility of national bank is significantly important and sees the main, most optimal and effective way for solving the problem in improving the policies of national bank. For without the support of effective money-credit policies only governmental projects and reforms will not be able to bare the desired results of economic growth (of approximately 5-6% this year) and factors for social stability. \"AFBA” calls for national bank and its president to restrain from political statements, take the appropriate responsibilities and take specific steps towards improvement.