Economy of Georgia (country)

The economy of Georgia is an emerging free market economy. After the dissolution of the Soviet Union, Georgia's economy had big challenges. But it began to grow again in the mid-2000s. This growth happened because of important changes made after the peaceful Rose Revolution.

Georgia is known for having clear rules and less corrupt practices compared to its neighbors. In 2007, the World Bank named Georgia the world's best country for economic reforms.

Since 2014, Georgia has been part of a special trading agreement with the European Union. This agreement helped increase trade with the EU in 2015.

History

19th century

Until the mid 19th century, Georgia's economy relied mostly on people working the land for noble landowners. Even after serfdom ended in 1864, the economy stayed mostly focused on farming.

Georgia's location by the sea helped it attract big investments. The port of Batumi became very important, especially with help from wealthy families. They built railways and the world's first major pipeline, turning the city into a key spot for energy. By 1913, Chiatura was a major producer of manganese, supplying half of the world's needs.

20th-21st Centuries

Georgia's economy has traditionally included Black Sea tourism, growing citrus fruits, tea, and grapes, as well as mining manganese and copper. It also produced wine, metals, machinery, chemicals, and textiles.

Like many countries after the Soviet Union, Georgia faced a big economic drop in the 1990s, partly because of tax issues. Problems like disputes in Abkhazia and South Ossetia, along with resistance to change, made recovery harder. Under President Shevardnadze, the government made some progress by changing prices, trade, and introducing a stable currency.

The United States helped Georgia with reforms after it became independent. They provided legal and technical support and training for officials and advisers.

Recent macroeconomic performance

Since 2003's Rose Revolution, Georgia made big changes to help its economy grow. These changes made it easier for businesses to start and grow, which brought more money from other countries to help build the nation.

Georgia's economy grew very fast from 2004 to 2007, with the biggest growth happening in 2007. Even when big problems happened, Georgia kept growing. The government got help from other countries and people living outside of Georgia sent money back home, which helped keep the economy strong.

Foreign direct investment in Georgia

Since 2003, Georgia has received money from other countries to help its economy grow. This money is called foreign direct investment and has been very important for Georgia.

Georgia makes it easy for businesses from other countries to invest there. The country has simple rules, low taxes, and good roads and trains. Because of these good conditions, many companies want to invest in Georgia. Between 2003 and 2011, about $8.5 billion came into Georgia from foreign investors. The most money came in 2007.

Some years, like 2009, had less investment because of big problems around the world. But Georgia continues to attract investment, showing its strong economy and friendly policies for businesses.

Trade

Since 2014, Georgia has been part of the European Union's Free Trade Area. The EU is its biggest trading partner. After signing a trade deal with the EU in 2015, trade between them grew.

In 2023, Georgia made a big economic deal with the UAE to create free trade between the two countries. Georgia's main exports include copper ores, ferroalloys, hazelnut, medications, nitrogen fertilizers, wine, crude oil, mineral water, and ethanol. Its main imports are oil products, vehicles, hydrocarbons, copper ores, mobile phones, wheat, and cigarettes.

Georgia's trade with Armenia grew in 2019. Georgia sent about 98.3 million $ worth of goods to Armenia, and brought in around 46.9 million $ in goods from Armenia.

International money transfers

In 2019, people living outside of Georgia sent money back to their families in Georgia. This money helps many families and the local economy.

The largest amount of money came from Russia. Other important countries that sent money include Greece, Italy, the United States, and Ukraine. Many other countries also contributed, such as Spain, Turkey, Kazakhstan, the UK, Israel, Azerbaijan, Germany, France, and Canada.

Institutional reforms

Under the Saakashvili administration, Georgia made big changes to improve its economy and help businesses grow. These changes made the system clearer and fairer for everyone. Georgia worked to reduce unfair treatment, and many groups noticed these improvements.

Georgia made its taxes very simple, cutting the number of taxes from 21 to just 6, and made many rules easier to follow. The country also made it simpler to trade with other countries by reducing taxes on imports and changing how customs work. These changes helped make Georgia a better place for businesses.

Unemployment

Unemployment has been a challenge in Georgia since the country became independent in 1991. In 2013, the unemployment rate was 16.9%, but it improved to 13.9% by 2024, according to the National Statistics Office.

Many people in Georgia live in rural areas, where small farming helps families. In 2007, about 416,900 people worked for themselves in farming. In these families, the person leading the home is often called an "individual entrepreneur," and other family members helping are called "unpaid family business workers." This way of counting helps explain why unemployment looks lower in rural areas than in cities like Tbilisi. Other nearby countries, such as Armenia, have seen similar patterns.

Structure of the economy

Energy

Main article: Energy in Georgia (country)

Georgia changed its electricity rules so people can buy and sell power freely. The country uses many rivers to make electricity, which is very important. Georgia has many rivers, and about 300 of them help make electricity. Big projects could make Georgia one of the top places for river power in the world.

Georgia started selling electricity to other countries in 2010. River power makes most of the electricity used in Georgia, with the rest coming from other types of power plants. Georgia still has room to make more river power by fixing old plants and building new ones.

Georgia’s electricity connects to Russia, Turkey, Armenia, and Azerbaijan. Georgia also gets and sells natural gas. It used to rely on Russia for gas but now gets help from Azerbaijan.

Georgia works with the EU on energy projects to improve security and support green energy.

Agriculture

Main article: Agriculture in Georgia (country)

About half of Georgia’s workers are in farming, though many grow food just for their families. Farming is getting better. Livestock is slowly growing, and grain production is up. The government helps farmers with better roads and ways to sell their goods.

Georgia is famous for its wine, with over 450 kinds of grapes. After Russia stopped buying Georgian wine in 2006, Georgia found new customers. In 2011, Georgia sold wine to 48 countries, and the wine business is growing.

In 2018, Georgia grew lots of different foods, like grapes, potatoes, corn, wheat, apples, tangerines, barley, watermelon, tomatoes, cucumbers, and peaches.

Tourism

Tourism in Georgia is growing fast and could get even bigger. More visitors are coming each year, which helps many parts of the economy. The government is spending money to improve travel places and roads to help tourism grow.

In 2021, Turkey sent the most visitors to Georgia, followed by Russia. Georgia had over 1.8 million visitors that year.

Logistics

Georgia is important for trade between Europe and Asia because of where it is located. Plans are for big projects, like a deep-water port at Anaklia, to help make Georgia a busy place for trade. A train route from China to Turkey through Georgia started in 2017.

Finance

Georgia’s finance system is mostly run by banks. Banks don’t help much with funding important projects or fixing trade problems.

Companies

In 2022, the most companies in Georgia were in Manufacturing, with 3,905 companies. Services had 2,934 companies, and Wholesale Trade had 1,036 companies.

Human Development Index of Georgia

The Human Development Index is a way to see how well a country is doing by looking at health, education, and money. In 2017, Georgia had a score of 0.780. This put it in the high human development group. It was ranked 70th out of 189 countries and areas.

From 2000 to 2017, Georgia's score went up from 0.673 to 0.780. During this time, people in Georgia lived longer, went to school more, and had more money to spend.