Georgia - Security
Georgia worries anti-Saakashvili protests hurting economy
Source : AFP 15.04.2009
TBILISI, April 15, 2009 (AFP) - Already suffering from last year's war with Russia and the global economic downturn, Georgia's economy is taking a fresh hit from ongoing opposition protests, officials and business leaders said.
As thousands have rallied for six days to demand President Mikheil Saakashvili's resignation, officials say foreign investors are thinking twice about Georgia's long-term political and economic stability.
"The flow of investments is being hampered by the political situation in the country," Prime Minister Nika Gilauri said in comments shown on Rustavi-2 television.
"I know investors and businesspeople who are hesitating to make final decisions and are waiting for developments in the country," he said.
Despite falling numbers at rallies, Georgia's opposition is settling in for a long struggle against Saakashvili, whom they accuse of mishandling last August's war with Russia and becoming increasingly authoritarian.
After setting up a round-the-clock camp outside his office, protest organisers vowed Tuesday to erect new tent camps every day in an effort to disrupt government operations and life in the capital.
Saakashvili has rejected calls to step down, instead offering talks on democratic reforms, but the opposition has shown no signs of agreeing to dialogue.
The prime minister's economic advisor, Vato Lezhava, said the protests had already caused the postponement of foreign investment worth hundreds of millions of dollars (euros).
"This is really causing uncertainty about the political stability of Georgia and stemming from that, economic stability," he said, though he refused to provide any details about the postponed projects.
"The protests have been peaceful and there have been no real problems on the streets," Lezhava said. "But the longer it lasts the bigger the damage to the business environment."
Georgia's economy is heavily dependent on foreign investment and growth already slowed to 2.1 percent last year from 12.4 percent in 2007, according to government figures.
Foreign investment plummeted after the war in August, dropping from 525 million dollars (394 million euros) in the second quarter to 150 million dollars (112 million euros) in the third quarter and 188 million dollars (141 million euros) in the fourth.
And analysts say the economic situation would have been far worse were it not for 4.5 billion dollars (3.37 billion euros) in foreign aid pledged after the war.
The government is predicting that foreign investment flows will rebound to 400 million dollars (300 million euros) by the fourth quarter of this year, but business leaders in Georgia say they are concerned that a protracted political battle will scupper investments.
"This is definitely having a negative impact. When you relay an image of instability to the whole world, investors will hold back," said Fady Asly, the chairman of the Georgian branch of the International Chamber of Commerce.
Shortly before the protests, ratings agency Fitch warned that due to fears of political instability it was placing Georgia's B+ long-term foreign and local currency debt on "rating watch negative," meaning that the assessment faced a possible downgrade.
Fitch also forecast that the Georgian economy would contract by two percent this year.
Opposition leaders deny that their protests are posing a threat to the economy, insisting that Saakashvili is to blame for economic problems because of the war with Russia and his refusal to step down.
"One of the main reasons why the opposition is confronting the authorities is that their policies have had a catastrophic impact on the economy," said opposition leader Salome Zurabishvili, a former foreign minister.
"Political instability and isolation will continue as long as these authorities are in power and this is what is leading to economic instability," she said.
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