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Journal number 1 ∘ Nodar Khaduri
Factors of Inclusive Growth and Challenges faced by the Economy of Georgia

Expanded Summary

Currently, the world is going through a very interesting stage. Despite the post Financial Crisis progress, there are a lot of problems in the world economy. First of all, these problems are related to income distribution and availability of economic growth impact to all layers of human population.

According to the World Bank, from 1995 to 2014, Population Prosperity grew up by 66%, from 690 trillion US dollars to 1 143 trillion US dollars; however, inequality level is still high. For example, in OECD countries prosperity is 52 times higher than in low income countries [see. www.worldbank.org].

The scientists write a lot about the problems of income distribution in scientific essays as well as articles, however a lot of them emphasize the threats that might arise from populism.

The problem is so complicated and all-embracing that not only scientists but practicing economists and international financial institutions work on it. For example, the World Bank has two main goals in its mission: End extreme poverty and building shared prosperity [see. The World Bank official webpage, www.worldbank.org]. Also, the mission of the World Bank is carved in stone at its headquarters – “Our dream is a world free of poverty“.[1] At the same time, in accordance to contemporary challenges, the International Monetary Fund held three conferences on rethinking macroeconomic policy, including the problems related to income distribution, and published the collection of materials.[2] [see. International Monetary Fund official webpage www.imf.org]. The Organisation for Economic Co-operation and Development (OECD) has been also working on this very issue.

It has to be considered that in 2017, Davos World Economic Forum’s experts prepared special report “The Inclusive Growth and Development Report [see. https://medium.com],” where the authors consider that “Inclusive growth can be thought of as a strategy to increase the extent to which the economy’s top-line performance is translated into the bottom-line result society is seeking, i.e., Broad-based expansion of economic opportunity and prosperity.” 7 important factors are crucial for inclusive growth: education and skills, basic services and infrastructure, corruption and rents, financial intermediation of real economy investment, asset building and entrepreneurship, employment and labor compensation, and fiscal transfers. These are the main factors in calculating the Inclusive Development Index (IDI) [see. www.weforum.org].

Because the problem is pressing, the Government of Georgia approved a social-economic development strategy, “Georgia 2020” in 2014, which focuses on Inclusive growth[3] as well. Considering that I was leading (and participating in) the process of composing the mentioned document, I will try to prioritize in this article the most important issues for the economy of our country. 

Policy of inclusive growth must be based on the economic growth oriented on development of entrepreneurship (this will ensure  resolving economic problems, creating jobs, and overcoming poverty), implementation of economic policy supporting inclusive economic growth (comprehensive involvement of society in the process of economic development (diaspora, migrants, ethnic minorities and other groups), prosperity of each member of society resulted from economic growth, social equality and raise of living standards) and rational expenditure of natural resources in the process of economic growth, ensuring ecological security and sustainability, and avoiding risks of natural disasters.

On the basis of analysis, the following critical problems interrupting economic development in Georgia were outlined: lack of competitiveness in private sector, improper development level of human capital, and limited availability of finances.

[1] Our dream is a world free of poverty

[2] Out of three, I participated in two conferences (in 2013 and 2015) as a Minister of Finance of Georgia.

[3]The project of program document was mainly prepared in the Ministry of Finance of Georgia.