8th International Scientific Conference on

Sustainability in Energy and Environmental Science

Problems of National Economy Management and Economic

Prosperity in the context of Financial Globalization

George Abuselidze and Zura Jegnaradze

Batumi Shota Rustaveli State University
Corresponding author’s E-mail:george.abuselidze@bsu.edu.ge
Globalization and it’s impact on a small open
economy countries
• Financial Globalization • Pros • Cons

• economic growth
• social development
“Financial openness does not in itself cause a crisis, but financial globalization is
one of the channels through which the crisis flows”

Authors:
• Reinhart and Rogoff (2004)
• Ranciere, Tornell & Westermann, 2003;
• Martin & Rey, 2006

• Financial liberalization increases the number of systemic risks and there is direct
link between banking crises and the free movement of capital in countries.
 Globalization’s controversial effects

• Stimulating economic growth • Reducing economic stability

Features of financial-economic
globalization
• Foreign investments – the great opportunity for a rapid economic
growth
• international trade
• employment growth
• technology development
• increased level of competition
• Foreign direct investment increased from $ 334.6 million to $ 1265.2 million in 2003-2018
• The influx of investments after the economic downturn caused by the war and crisis in 2008 contributed to
economical increase and the GDP growth in Georgia

• regional economic shocks and

the global economic slowdown
had negatively affected Georgia
and the economic growth had
fall from 6,2% to 2.5% in 2015

Figure 1: Decomposition of GDP Growth (2013-2019)

Source: Compiled by the authors based on data from the [17, 20, 23, 24]
Globalization’s negative side
• impact of COVID-19

Economic growth in the euro area countries by

2020 (%)
Last year forecast New forecast Series3

1.3
1.2

0.9
0.8

0.6
Figure 2: Economic growth in the euro area
countries by 2020, %

0.3
0.2

0
Source: Compiled by the author based on OECD
Eurozone Germany France Italy data [21]
Figure 3 : Money Transfers by Countries 2012-2020
Source: Compiled by the author based on data from the National Bank of Georgia

As a result of the first wave of the

coronavirus, the number of visitors and the
income received from them also decreased.
Remittances fell by 42% and foreign debt
increased. According to various
international organizations and studies, the
Georgian economy will shrink to 2.5 - (-5)
percent.

18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Government's external doubt (thousand)

Figure 4 : the government's external debt 2010-2019

Source: Compiled by the author based on data from the Ministry
of Finance of Georgia
Compatibility of financial markets and
economic sovereignty
How should the state protect itself from an invisible power?

• Regulation of the openness of the economy

• Production of import substitute products
• Development of the national real sector
• Regulation of customs policy, etc.
 Reference between indicators of economic well-being and the degree of globalization: Does globalization supply to
increasing income?

Figure 5: 2019 KOF Globalization Index: Economic Dimension Figure 6: Gross national income per capita 2018, Atlas method
Source: Source: Compiled by the author based on data from the KOF index of globalization Source: Compiled by the author based on World Bank data
Country KOF Index of Globalization Per capita income

Japan 66th 41310$ (22nd)

Germany 44th 47090$ (18th)

Canada 43rd 44940$ (20th )

Georgia-Europian Union Number of products without a customs tarff

Preferential trade regime (GSP) 3,200 types

The Preferential Trade Promotion regime (GSP +) 7,200 types

DCFTA 9,600 types

Figure 8 Trade Features between Georgia-Europian Union

Unemployment

• Liberal policy of international trade

• The simplification of bureaucratic procedures
• The possibility of free inflow of foreign capital
• Attractive investment environment
Figure 8: Unemployment rate, %
Source: Compiled by the author based on World Bank data
Conclusion

• the higher the level of economic globalization is, the higher the economic
prosperity and well-being indicators are.

• globalization has a more positive effect on the economic well-being of countries

on the path of economic development than a negative one.
Thanks for attention
References
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