Optimizing State Functions and the Need for Regulation in a Transformative Economy: Navigating Global Economic Changes

Abstract

This paper aims to analyze the structure of the Georgian state budget expenditures and their impact on economic activity for the period 2010-2023. The study aims to investigate issues of optimizing expenditure allocation and quantitatively assess the impact of specific sectors on the economic growth process. The study is based on a multivariate regression analysis, which enables the assessment of the impact of different categories of government spending on economic activity. The analysis used such key segments as education, health and social support, and environmental protection. The Ordinary Least Squares (OLS) method and statistical significance testing were employed to evaluate the model's fit, while the R² coefficient was used to assess the model's effectiveness. The scientific novelty lies in the fact that the study presented a modeling of the consistent impact of these segments on Georgia's economic activity over a long period of time. The paper focused on the quantitative assessment of the dynamics of expenditures on various sectors and the intensity of their impact, which creates the basis for more effective optimization of budgetary policy. State spending on education has a statistically significant and positive impact on economic activity, indicating its important role in the country's economic development. Environmental protection spending also shows a positive trend, although its statistical significance needs to be confirmed on the basis of additional data. The impact of health and social protection spending is characterized by a negative trend, although the result is not statistically reliable. The conclusions of the paper can be used as a basis for increasing the effectiveness of budgetary policy, especially by strengthening state investments in the education and environmental protection sectors.

Keywords: transformative economics, public spending, economic growth, human capital, sustainable development goals (SDGs)