Annual Action Programme covered by the programming document National Indicative Programme for the European Neighbourhood and Partnership Instrument in favour of Georgia for 20091
Budget heading Total cost Legal basis 19 08 01 03 €27.4 million Regulation (EC) 1638/2006 of the European Parliament and of the Council of 24 October 2006laying down general provisions establishing a European Neighbourhood and Partnership Instrument
Georgia in the last 4 years has enjoyed rapid GDP growth, which was expected to continue over the next years. In the first half of 2008, Georgia still enjoyed strong growth rate (12.4%) with average inflation rate of 9.2%, which had increased to 11.3% in July 2008.Economic growth was driven by financial intermediation, hotels and restaurants, transport and communication, real estate and construction. Georgia had made considerable progress in improving the investment climate and in the area of economic liberalisation since the "Rose revolution". While the current trade balance had recorded a deficit of 33% of GDP, mainly due to the large volume of imports comparedto exports, total FDI for 2007 accounted for US$ 1.6 billion, with an estimate of US$ 1.1 billion for 2008 (respectively 15.3% – 9.1% of GDP). The European Union, with Germany and Bulgaria as major traders, remains the largest commercial partner. About a third of foreign investment in recent years was used for the construction of pipelines by foreign firms. The biggest investors are USA followedby Great Britain. Kazakhstan and Azerbaijan and even Russia contributed large amounts in recent years; significant investments come also from the tax heavens Cyprus and Virgin Islands. Before the open conflict between Russia and Georgia on August 2008, economic growth was running in double digits. With such a strong growth, there were inevitably inflationary pressures, but the central Bank wasbringing these under control. The external current account
In the preparation of the present Annual Action Programme, due account has been taken of the observations made by the European Parliament on the ENPI Strategy Papers 2007-2013 and the Indicative Programmes 2007-2010
deficit was large, but it was fully financed by private capital inflows and, in particular, foreigndirect investment. Recent political instability and the open conflict between Russia and Georgia have negatively impacted the economic growth. On 22 October 2008 at the Donors Conference held in Brussels, public and private donors together have pledged US$ 4.55 billion over the next three years to help Georgia in post-war recovery. The sum includes about US$ 3.7 billion from governments and US$ 850million from private donors. In December 2008 European Union decided to extend the GSP+ regime to Georgia, thereby facilitating its commercial relations with the EU. The Government of Georgia envisages to counter-balance the effects of the crises by pursuing a counter-cyclical fiscal policy and intensifying public investments in infrastructure projects, which will stimulate the economy. Besides,it is planned to increase spending in social programmes. In 2004, Georgia was included among the countries benefiting from the European Neighbourhood Policy. In November 2006 the EU-Georgia European neighbourhood Policy Action Plan (ENP AP) covering a 5-year time-frame was agreed. Since that time the Government of Georgia has been working on the ENP AP implementation. The recent politicalinstability and the open conflict between Georgia and Russia have negatively affected the process. In summer 2008 the European Commission put forward concrete ideas for enhancing the relationship between the EU and its neighbouring countries, including Georgia, through the Eastern Partnership. This would imply the possibility to upgrade existing partnership agreements to new association agreements...