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.
- Following a second consecutive year of record high infrastructure expenditures in 2020, public investment is planned to continue supporting growth in the medium run.
Historically low inflation with 3% target set from 2018 by National Bank of Georgia
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.
- With international travelers reaching 9.4 million in 2019, including 5.1 million tourist arrivals, Georgia is already an established tourism destination and looks 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$ 1.3 billion (7.5% of GDP) in 2019.
- FDI averaged 8.7% of GDP in 2010-2019.
- Sovereign credit ratings were upgraded in 2019 and maintained in 2020 despite the COVID-19 shock.
- Share of non-resident investors holding Georgian government securities was highest in 2020 since 2013.
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.
- Continued economic relationship with Russia, although economic dependence is relatively low
- 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 2019, Russia accounted for 13.2% of Georgia’s exports and 11.1% of imports.