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The 2012 Index of Economic Freedom: Georgia’s Ranking Falls

Published: January 12, 2012 | 10:43 pm
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January 12- For 17 years, The Heritage Foundation and The Wall Street Journal have reported on the status of economic freedom around the world, measuring 184 nations across the globe according to rule of law, limited government, regulatory efficiency, and open markets.Hong Kong has been ranked the world’s freest economy for the 18th consecutive year in the 2012 Index of Economic Freedom.Globally, the 2012 Index noted a general decline in economic freedom across the board, with nations throughout the world unsuccessfully trying to “spend their way out of recession.” The United States itself dropped from ninth to 10th, continuing a slide that last year knocked the U.S. out of the category of “free” nations for the first time since the Index’s inception.

Georgia’s economic freedom score is 69.4, making its economy the 34th freest in the 2012 Index. Its overall score is 1.0 point lower than last year, with declining ratings for corruption, government spending, business freedom, and monetary freedom. Georgia is ranked 16th out of 43 countries in the Europe region, and its overall score is higher than the world average.

Georgia had attained status as a “mostly free” economy the past two years but fell back to the “moderately free” category this year. Still, the economy performs quite well in some key policy areas. Notable reforms to enhance regulatory efficiency have been implemented, and open-market policies are maintained along with low tax rates. Despite a sharp contraction due to the Russian invasion and the global recession, the economy demonstrated a high level of resilience overall.

Lingering institutional weaknesses in two areas call for much more committed reforms. Georgia continues to score below the world average in freedom from corruption and the protection of property rights, and marginal reforms have failed to generate much improvement. In addition, public spending has been growing as a share of GDP, and the budget balance has been negative.

Of all other former Soviet republics, only neighboring Georgia as well as Lithuania and Estonia occupy higher spots in the 2012 Index of Economic Freedom. Armenia has the 39th freest economy in the world thanks to a liberal regulatory environment and “competitive” tax rates, according to an annual survey released by two conservative U.S. institutions on January 12.


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