Georgia’s Economic Overview
Diversified Resilient Economy
Leading economy in the region on the back of wide sector activities
- Diversified non-commodity reliant economy with consistently high GDP growth across the last decade
Investment-led GDP growth
- Development of large public infrastructure programmes backed by multilateral international funding driving potential GDP growth.
- Infrastructure expenditures have reached record-high levels in 2019-2021 and are planned at another high of 8.8% of GDP in 2022, with public investment set to continue supporting growth in the medium run.
Economic resilience has been underscored by a double-digit real GDP rebound of 10.6% in 2021, as the economy also overtook its 2019 level by 3.2%. Real GDP growth reached 10.3% in 7M22, maintaining pace.
Historically low inflation with 3% target set from 2018 by National Bank of Georgia
- Inflation, like elsewhere around the world, was elevated at an annual 9.6% in 2021 due to the COVID-19-induced supply side pressures and swiftly recovering domestic demand, with the National Bank of Georgia tightening the monetary stance (monetary policy rate highest since 2008 at 11% as of September 2022) and reaffirming commitment to achieving the 3% inflation target. With the Russia-Ukraine war exacerbating inflationary pressures, inflation is expected to slowly decelerate but remain above the target during 2022.
Liberal economic policy
Top performer globally in WB Doing Business over the past 12 years
- Liberty Act (effective January 2014) ensures a credible fiscal framework.
- Fiscal deficit/GDP capped at 3%; Public debt/GDP capped at 60%.
- As a testament of safeguarding prudent and credible fiscal policy, the Liberty Act-mandated three-year consolidation plan has been ratified following the COVID-19 shock in order to ensure compliance with the fiscal rules.
- Business friendly environment and low tax regime (attested by favourable international rankings).
Regional logistics and tourism hub
A natural transport and logistics hub, connecting land-locked energy rich countries in the east and European markets in the west
- Access to a market of 2.8 billion customers without customs duties: Free trade agreements with EU, China, Hong Kong, CIS and Turkey and GSP with USA, Canada, Japan, Norway and Switzerland; FTA with Israel and India under consideration.
- Tourism inflows stood at US$ 3.3 billion in 2019 and international travelers reached 9.4 million in 2019 (up 7.8% y-o-y), out of which tourist arrivals were up 6.8% y-o-y to 5.1 million.
- Tourism revenues rebounded to over 120% of 2019 level in July 2022 (over 87% of 2019 level in 7M22), with Georgia, as an already established tourism destination, looking upon the tourism sector bouncing back as a major growth contributor once the pandemic is over.
- Regional energy transit corridor accounting for 1.6% of the world’s oil and gas transit volumes.
An influx of foreign investors on the back of the economic reforms have boosted productivity and accelerated growth
- FDI stood at US$ 1.2 billion (6.1% of GDP) in 2021.
- FDI has averaged 8.2% of GDP across the last 10 years.
- Sovereign credit ratings were upgraded in 2019 and maintained in 2020 despite the COVID-19 shock.
- After repaying 10-year, 6.875% coupon Eurobonds issued in 2011, in April 2021, the Georgian government priced USD 500 million, 5-year Eurobonds at a record low coupon rate of 2.75%, with demand reaching four times the amount of issue, underscoring investor confidence, yielding a competitive edge over comparable countries and providing a favorable benchmark for future securities.
Support from international community
Georgia and the EU signed an Association Agreement and DCFTA in June 2014
- Visa-free travel to the EU is another major success in Georgian foreign policy. Georgian passport holders were granted free visa entrance to the EU countries from 28 March 2017.
- Discussions commenced with the USA to drive inward investments and exports.
- Strong political support from NATO, EU, US, UN and member of WTO since 2000; Substantial support from DFIs, the US and EU.
Electricity transit hub potential
Developed, stable and competitively priced energy sector
- Only 20% of hydropower capacity utilized; 155 renewable (HPPs/WPPs/SPPs) energy power plants are in various stages of construction or development.
- Georgia imports natural gas mainly from Azerbaijan.
- Significantly boosted transmission capacity in recent years, a new 400 kV line to Turkey and 500 kV line to Azerbaijan built, other transmission lines to Armenia and Russia upgraded.
- Additional 2,000 MW transmission capacity development in the pipeline, facilitating cross-border electricity trade and energy swaps to Eastern Europe.
Stable political environment
- Georgia underscored its commitment to European values by securing a democratic transfer of political power in successive parliamentary, presidential, and local elections and by signing an Association Agreement and free trade agreement with the EU.
- New constitution amendments passed in 2013 to enhance governing responsibility of Parliament and reduce the powers of the Presidency.
- Russia began issuing visas to Georgians in March 2009; Georgia abolished visa requirements for Russians – Russia announced the easing of visa procedures for Georgians citizens effective December 23, 2015.
- Direct flights between the two countries resumed in January 2010. However, they have been banned again since July 2019 following the decision from Russia.
- Member of WTO since 2000, allowed Russia’s access to WTO; In 2013 trade restored with Russia.
- In 2021, Russia accounted for 14.4% of Georgia’s exports and 10.2% of imports.