In the last decade, Georgia has made significant progress attributable to sound economic management. Between 2011 and 2021, the economy grew by an annual average of 4%.
According to the worldwide upper-middle-income threshold (US$6.85 per capita per day, 2017 PPP), the poverty rate in the country fell from 69% in 2011 to 53% in 2021.
But serious structural problems, including as low productivity and the difficulty of creating new, high-quality jobs, continue to be an issue. Still, many rural Georgians are involved in agriculture of relatively low output. Learning results are low, and a lack of skilled workers makes it difficult to run a business or expand an existing one. This weakens human capital formation.
Georgia is especially susceptible to global and external shocks because of its open trade policy and reliance on tourism revenue. Extensive use of foreign currency and a steadfast dependence on foreign savings both increase vulnerability. The rapid post-epidemic rebound and recovery from the early impact of the war in Ukraine and associated sanctions have nonetheless highlighted the growing resilience of Georgia’s economy.
Georgia Economy In Europe 2023 [Facts & History]
Georgia’s economy is a free-market, free-enterprise model. Its GDP collapsed after the fall of the Soviet Union but has since grown by double digits as a result of the democratic and economic reforms instituted in the wake of the peaceful Rose Revolution.
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As of 2014, Georgia had “moved from a near-failed state in 2003 to a relatively well-functioning market economy.” Georgia has been at the top of the World Bank’s ease of doing business ranking every year since 2007. The World Bank even called Georgia the best economic reformer in the world in 2007.
Georgia Economic Growth
The economic growth of Georgia can be attributed to the country’s relatively open and honest culture. Transparency International has ranked Georgia as the least corrupt country in the Black Sea area for 2018. Georgia ranked higher than its immediate neighbors and neighboring European Union states.
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Georgia is the only country in its immediate neighborhood where the press is not considered unfree, despite having a mixed news media landscape.
Since 2014, Georgia has been a part of the Free Trade Area between the European Union and itself. The EU remains Georgia’s most important commercial partner, accounting for more than a quarter of the country’s total trade turnover.
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When compared to the previous year, 2015 saw a further boost in bilateral commerce thanks to the EU trade treaty, while trade with the CIS fell drastically.
The State of Georgia Macroeconomy Recently
Georgia’s economy has grown among the FSU’s quickest in recent years. Following the Rose Revolution of 2003, the new government of Georgia enacted far-reaching and all-encompassing changes that affected every facet of daily life in the country.
The goal of the changes was to foster private-sector growth and liberalization of the economy, two essentials for long-term economic prosperity. The government’s efforts to create a favorable business climate have resulted in a large influx of foreign direct investment, which in turn has contributed to the country’s rapid economic expansion.
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As reported by CISTRAN Finance news, Georgia was among the top ten countries in the Emerging Market Energy Security Growth Prosperity Index in 2013. Based on factors like energy reserves and GDP, the index ranks which developing countries have the most promising futures.
Georgia’s economy was able to diversify and demonstrate rapid upward growth once reforms were implemented, with real GDP growth averaging over 10% from 2004-2007 and peaking at 12.3% in 2007. Georgia’s GDP as a whole grew by 35% between 2004 and 2007.
Economic liberalization in Georgia has shown some resilience in the face of external shocks, such as the 2008 war with Russia and the global financial crisis. In spite of this, Georgia’s economy expanded by 2.3% in 2008. The economy shrank in 2009 (-3.8%) but quickly rebounded, expanding by 6.3% in 2010 and 7.0% in 2011. Between 2009 and 2010, the jobless rate dropped from 16.9 to 16.3 percent.
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The annual inflation rate in Georgia was 2.4% in 2013. Following 2010’s record high of 11.2%, this figure has dropped dramatically. Since food makes up a disproportionately large portion of the Georgian consumer basket, its rising cost was a major factor in the inflation rate’s rise.
Georgia’s current account balance in 2011 was projected to be USD$1.489 billion, according to the International Monetary Fund. Among the European and Transcaucasian Post-Soviet governments, Georgia has one of the more manageable deficits.
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As time went on, Georgia’s trade with its most important trading partners expanded. Georgia exported $87,263.53 worth of goods to Armenia in 2016, while importing $144,931.92 worth of goods from Armenia. The rise in the value of the Georgian currency can be attributed to the fact that the country’s current account deficits have been more than covered by the influx of foreign cash.
FDI in Georgia
Rapid economic expansion in Georgia since 2003 can be directly attributed to the country’s attractiveness as an investment destination for foreign companies.
The country is seen as a desirable location for foreign direct investment (FDI) thanks to its free investment climate and fair treatment of both domestic and international businesses.
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There are many factors that make doing business in Georgia a good idea, including the country’s advantageous location, its developed, integrated, and multimodal transport infrastructure, its educated, skilled, and competitive workforce, its stable economic development, its liberal and free market-oriented economic policy, its six taxes only and reduced tax rates, its reduced number of licenses and permissions, and its dramatically simplified administrative procedures.
The Free Industrial Zones in Georgia provide tax relief for businesses in addition to the state’s other incentives.
Georgia received a total of US$8511.5 million in FDI between 2003 and 2011. Foreign direct investment (FDI) hit a record high of $2,015.0 mn in 2007 and has increased by 69.3 % year on average since then.
The high investment rate continued until 2008. As of 2008, the European Union, the United Arab Emirates, and Turkey accounted for approximately 60% of all FDI inflows, up from 56% in 2007.
Foreign direct investment (FDI) inflows fell steadily during 2009. The Russian–Georgian War and the global financial crisis were the primary external shocks responsible for the decline.
While the real estate market received the second-highest amount of FDI during that period (15.8%), at US$389 million, the industry sector received 31.2% of the total.
Georgia Trade
Since 2014, Georgia has been a part of the Free Trade Area between the European Union and itself. The EU remains Georgia’s most important commercial partner, accounting for more than a quarter of the country’s total trade turnover.
After signing the EU trade pact, bilateral commerce increased even further in 2015, while trade with the Russian-led CIS countries fell by 22%.
Top Georgian exports in 2015 included copper ores and concentrates, ferroalloys, hazelnuts, pharmaceuticals, nitrogen fertilizers, wine, crude oil, mineral water, non-denatured ethanol, and spirits.
Oil goods, automobiles, hydrocarbons, copper ores and concentrates, mobile phones and other wireless phones, wheat, cigarettes, iron tubes and pipes, and iron structures and sections of iron structures were the most important imports into Georgia in 2015.
Georgia’s exports to Armenia increased by 2% this year despite a 7% drop in imports. Trade between Georgia and Armenia in 2019 was valued at $98.3 million (or 4% of total exports) and $49.1 million (or 1% of total imports).
