Georgia flag Georgia: Economic and Political Overview

The economic context of Georgia

Economic Indicators

Georgia is a transition economy influenced by its past affiliation to the Soviet Union. Economic growth in recent years has been boosted by rising domestic and external demand, resulting in higher consumption, exports, tourism, and remittances. After contracting following the COVID-19 pandemic, the country’s GDP rebounded strongly, growing 10.1% in 2022 and an estimated 7% in 2023 (data GeoStat), supported by increased tourism, transit trade, and financial inflows linked to Russia’s war in Ukraine, as well as swift policy responses. According to the IMF, growth is expected to ease to 5.7% in 2024, with consumption playing a larger role supported by strong real wage growth and employment. In the medium term, growth is expected to converge to its potential rate of around 5%.

In 2023, the current account deficit remained at a historic low of 4.5% of GDP. Lower remittances from Russia were offset by an improved goods trade deficit, aided by lower import prices. Gross international reserves at the end of 2023 were USD 5 billion, covering slightly over 3 months of imports. However, the deficit is projected to widen in 2024 to 6% of GDP as remittances normalize and imports increase. Over the medium term, it is expected to converge to 5.5% of GDP as the services trade balance improves. The fiscal deficit in 2023, including budget lending, was 2.4% of GDP, surpassing the budgeted deficit of 2.8%, mainly due to higher revenues. The 2024 budget aims for a deficit of 2.5% of GDP, with increased revenues from corporate income tax for banks and new gambling taxes funding higher expenditures. These include increased wages, social benefits, and capital investments. Public debt is projected to remain below 40% of GDP both in 2024 and over the medium term. Inflation experienced a significant decline throughout 2023, ending the year at 0.4 percent. This drop was facilitated by a robust lari, reduced commodity prices, and a firm monetary policy approach. In response, the National Bank of Georgia (NBG) has gradually reduced its policy rate by a total of 275 basis points since May 2023, reaching 8.25 percent by March. However, inflation is projected to rise to 4 percent by the close of 2024, as the positive impact of last year's external factors diminishes and the tightness of monetary policy is relaxed. Over the medium term, inflation is anticipated to revert to its target level.

The Georgian unemployment rate is still high: it was estimated at 18.4% in 2023 and is expected to reach 18.6% by 2024, also due to the increased number of immigrants joining the labor market, before easing in 2025. According to the latest figures from GeoStat, 15.6% of the population was living below the absolute poverty line in 2022: Inequalities remain high compared to other economies in the region, with low levels of education and a rural population (40% of the total – World Bank). Overall, the average GDP per capita (PPP) was estimated at USD 20,172 in 2022 by the World Bank.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 24.9930.5432.8735.5538.23
GDP (Constant Prices, Annual % Change) 11.07.55.75.24.7
GDP per Capita (USD) 6,7748,1738,8259,58110,341
General Government Balance (in % of GDP) 0.00.40.40.70.7
General Government Gross Debt (in % of GDP) 39.239.238.837.837.5
Inflation Rate (%) 11.92.52.64.23.4
Unemployment Rate (% of the Labour Force) 17.316.415.716.016.5
Current Account (billions USD) -1.12-1.33-1.91-1.98-2.10
Current Account (in % of GDP) -4.5-4.3-5.8-5.6-5.5

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

More than 1.83 million Georgians, out of a population of 3.7 million, constitute the domestic labour force (World Bank) and the country possesses many natural resources on its territory. The country has forests and woods, rivers and lakes, farmland, marble, minerals, manganese, iron, copper, coal, oil, clays, and sand, as well as wildlife. Georgia has an agricultural tradition, which has helped develop its economy for years. However, the agricultural sector has been in decline since 1995: agriculture now accounts for 6% of the GDP and employs 40% of the working population (World Bank, latest data available). Around 98% of farmers are self-employed, and production is largely for self-consumption. More than 40% of Georgian territory is considered agricultural land, which also includes pastures and grasslands. The main agricultural products are cereals, technical plants, subtropical plants, fruit varieties, melons and gourds, tobacco and wine grapes, as well as rice, tea and cereals, tea and livestock. Georgia is also one of the oldest regions of wine producers and is rich in drinking water resources. The country has signed a Deep and Comprehensive Free Trade Area (CFTA) agreement with the EU, which implies that all Georgian agricultural products can be exported without duty to EU markets. According to the latest available figures by the National Statistics Office, the average annual income stands at GEL 1,508 for small holdings and GEL 13,151 for medium and large holdings.

Following a decline during the break-up of the Soviet bloc, and again between 2004 and 2008, the industrial sector in Georgia has seen signs of recovery. The industry contributes 21.4% of the GDP and employs 14% of the working population, while the manufacturing sector accounts for 10% of the GDP (World Bank). The industrial sector includes mainly food processing and the manufacture of transportation equipment, electric motors, iron, steel, aircraft, chemicals and textiles. Mineral extraction concerns manganese (mainly in the Chiatura and Imeritia regions), copper, tungsten, marble and oil. Although Georgia has significant hydroelectric power generation capacity, it is heavily reliant on oil and gas imports. According to GeoStat, the total industry turnover stood at GEL 24.5 billion in 2023, 6.5% less than one year earlier.

Services is the most dynamic subsector of the economy, accounting for 59.6% of Georgia's GDP and employing around 46% of the workforce (World Bank). The sector is boosted by the hotel, restaurant, transport and telecommunications industries. The tourism sector grew rapidly until COVID-19 (9.4 million visitors in 2019 according to Georgian National Tourism Administration), and has become one of the government's priorities with the development of coastal infrastructures in the Adjara region and Svaneti ski resorts. In 2023, the influx of international non-resident travelers to Georgia reached 7.1 million, marking a 30.3% increase compared to the preceding year's figures, but still below the pre-pandemic level. As of September 30, 2023, there were 15 commercial banks in operation in Georgia, with total assets worth GEL 65.58 billion.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 40.4 13.8 45.8
Value Added (in % of GDP) 6.1 21.5 59.9
Value Added (Annual % Change) 2.9 15.2 9.4

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
77,2/100
World Rank:
12
Regional Rank:
7

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Latest Update: April 2024

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