Georgia: Economic and Political Overview
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Georgia is a transition economy influenced by its past affiliation to the Soviet Union. Economic growth in recent years was 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 in 2021 (+10.4%) and continued its positive trend in 2022, when growth - driven by higher export, tourism revenues, and a large inflow of money transfers - was estimated at 9% by the IMF. Strong private consumption was also boosted by the surge in migrants from Ukraine. According to the IMF projections, GDP growth will moderate to 4% in 2023, due to fading support from Russian inflows and weaker external demand, returning to just above the trend rate of 5% in 2024.
General government debt, which had already shown an upward trend in recent years as a result of public infrastructure spending, expanded further in the last couple of years, as the government stepped up social and capital spending as part of a Covid-19 response package. In 2022, the government managed to reduce the deficit to 2.7% of GDP thanks to an increase in revenue prompted by enhanced taxation. For 2023 and 2024, Fitch Ratings sees a deficit below the 3% fiscal rule ceiling, at 2.6% and 2.8%, respectively. After increasing by more than half following the outbreak of the Covid-19 crisis, the debt-to-GDP ratio returned to a downward trend and stood at 39.8% in 2022, of which 75% is foreign-currency denominated, and should remain relatively stable over the forecast horizon (IMF). As in most countries, inflation stood well above the National Bank of Georgia's target of 3%, averaging 11.6% in 2022, pushed by rising energy prices and higher demand due to the immigration influx. The IMF forecasts the inflation to moderate to 6% this year before halving in 2024, although risks remain tilted to the upside. Given Georgia’s small and open economy, the lari exchange rate remains very volatile, often eroding household purchasing power.
The Georgian unemployment rate is still high: it was estimated at 18.7% in 2022 and is expected to reach 20.2% by 2024, also due to the increased number of immigrants joining the labour market. According to the latest figures from GeoStat, 17.5% of the population was living below the poverty line in 2021: 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 19,789 in 2022 by the IMF.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 15.85 | 18.63 | 24.61 | 27.95 | 29.95 |
| GDP (Constant Prices, Annual % Change) | -6.8 | 10.5 | 10.1 | 4.0 | 5.0 |
| GDP per Capita (USD) | 4,263 | 4,995 | 6,671 | 7,600 | 8,172 |
| General Government Balance (in % of GDP) | -4.7 | -2.5 | -0.5 | 0.3 | 1.0 |
| General Government Gross Debt (in % of GDP) | 60.2 | 49.7 | 39.8 | 40.5 | 40.3 |
| Inflation Rate (%) | 5.2 | 9.6 | 11.9 | 5.9 | 3.2 |
| Unemployment Rate (% of the Labour Force) | 18.5 | 20.6 | 18.7 | 19.5 | 20.2 |
| Current Account (billions USD) | -1.98 | -1.94 | -0.77 | -1.15 | -1.26 |
| Current Account (in % of GDP) | -12.5 | -10.4 | -3.1 | -4.1 | -4.2 |
Source: IMF – World Economic Outlook Database, October 2021
More than 1.7 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 6.5% of the GDP and employs 38% of the working population (World Bank, latest data available). 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 modest recovery. The industry contributes 21.4% of the GDP and employs 14% of the working population, while the manufacturing sector accounts for 9.3% 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. In the first nine months of 2022 total industry turnover stood at GEL 13.6 billion, 35.3% more than in the same period one year earlier.
Services is the most dynamic subsector of the economy, accounting for 59.5% of Georgia's GDP and employing around 48% 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, 1.7 million in 2020 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. Nevertheless, in 2022 the tourism sector showed signs of recovery, with 5.4 million foreign tourists (188.5% y-o-y). The National Administration of Tourism declared that Georgia received USD 3.5 billion from international tourist visits in 2022, 7.6% more than the pre-COVID level recorded in 2019.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 38.2 | 14.3 | 47.6 |
| Value Added (in % of GDP) | 6.5 | 21.4 | 59.5 |
| Value Added (Annual % Change) | 1.5 | 2.4 | 15.5 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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Latest Update: November 2023
