Economy of Georgia (country)

The economy of Georgia is an emerging free market economy. After the dissolution of the Soviet Union, Georgia's economy faced 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. By 2014, Georgia had turned from a struggling country into a stronger economy.

Georgia is known for having clear rules and less corrupt practices compared to its neighbors. In 2007, the World Bank even named Georgia the world's best country for economic reforms. The country also has a mix of different types of news sources, making it stand out in the area.

Since 2014, Georgia has been part of a special trading agreement with the European Union, which is now its biggest trading partner. This agreement helped increase trade with the EU in 2015, while trade with other nearby countries decreased.

History

19th century

Until the mid 19th century, Georgia's economy relied mostly on a system where people worked 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, like wars and money troubles around the world, 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 seen a lot of money coming in from other countries to help its economy grow. This money, called foreign direct investment, 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 to help people and goods move around. Because of these good conditions, many companies want to invest in Georgia. In the years between 2003 and 2011, about $8.5 billion came into Georgia from foreign investors. The most money came in 2007, when investment grew by almost 70% in one year.

Some years, like 2009, saw less investment because of big problems around the world and a war nearby. But even with these challenges, 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, and the EU remains its biggest trading partner, making up more than a quarter of all trade. After signing a trade deal with the EU in 2015, trade between them grew, while trade with the Commonwealth of Independent States dropped by 22%.

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.

In 2019, Georgia's trade with Armenia grew, with exports to Armenia rising by 2% and imports falling by 7%. Georgia sent about 98.3 million $ worth of goods to Armenia, making up 4% of its total exports, and brought in around 46.9 million $ in goods from Armenia, which was 1% of its total imports.

International money transfers

In 2019, people living outside of Georgia sent US$1.73 billion back to their families in Georgia. This money helps support many families and the local economy.

The largest amount of this money came from Russia, with US$428.89 million. Other important countries that sent money include Greece with US$192.56 million, Italy with US$239.17 million, the United States with US$178.41 million, and Ukraine with US$47.3 million. 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 make it easier for businesses to grow. These changes helped create a clearer and more fair system for everyone. Georgia worked hard to reduce problems like 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 much 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 to operate.

Unemployment

Unemployment has been a continuing 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 survive. In 2007, about 416,900 people were counted as working 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 has changed its electricity rules to let everyone buy and sell power freely. The country uses lots of rivers to make electricity, which is very important for its energy plan. Georgia has many rivers, and about 300 of them help make electricity. Plans are for big projects that could make Georgia one of the top places for river power in the world.

In 2007, Georgia made about 8.3 billion kilowatt-hours of electricity and used nearly the same amount. Most of this electricity comes from rivers. By 2005, over 86% of electricity came from rivers. In 2006, making river power grew by 27%, and other types of power also grew quickly. Since then, river power has become even more important. The Inguri power plant is the biggest river power plant in the area.

Georgia started selling electricity to other countries in 2010. River power makes about 80-85% 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.

Before 2004, Georgia had big problems with its electricity system, and blackouts were common. The government made new rules to fix this, and now the electricity system works better, with services almost always available. Private companies now help run the electricity system.

Georgia’s electricity connects to Russia, Turkey, Armenia, and Azerbaijan. In 2008, Georgia started selling electricity to Russia. 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, support green energy, and attract investment.

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 after problems from past conflicts and changes after the Soviet Union broke up. Livestock is slowly growing, and grain production is up. The government helps farmers with better roads and ways to sell their goods.

Tea, hazelnuts, and fruits used to grow a lot in Abkhazia, but conflicts there hurt this. 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. In 2011, about 3 million people visited Georgia, which was 40% more than in 2010. The government is spending money to improve travel places and roads to help tourism grow. In 2018, tourism brought in 3.4 billion dollars for Georgia.

In 2021, Turkey sent the most visitors to Georgia, followed by Russia. Georgia had over 1.8 million visitors that year, which was 7.7% more than the year before.

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. In 2015, there were 21 banks, and five big ones controlled most of the money. 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 measure how well a country is doing by looking at health, education, and money. In 2017, Georgia had a score of 0.780, which puts 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, a growth of about 16%. During this time, people in Georgia lived longer, went to school more, and had more money to spend. But we need to be careful when comparing old and new scores because the ways these scores are worked out have changed over time.