Economic Outline

Economic Indicators

Georgia is a transition economy influenced by its past affiliation to the Soviet Union. Economic growth in recent years has been boosted by rising domestic and external demand, resulting in higher consumption, exports, tourism, and remittances. After contracting following the COVID-19 pandemic, the country’s GDP rebounded strongly, growing 10.1% in 2022 and an estimated 7% in 2023 (data GeoStat), supported by increased tourism, transit trade, and financial inflows linked to Russia’s war in Ukraine, as well as swift policy responses. According to the IMF, growth is expected to ease to 5.7% in 2024, with consumption playing a larger role supported by strong real wage growth and employment. In the medium term, growth is expected to converge to its potential rate of around 5%.

In 2023, the current account deficit remained at a historic low of 4.5% of GDP. Lower remittances from Russia were offset by an improved goods trade deficit, aided by lower import prices. Gross international reserves at the end of 2023 were USD 5 billion, covering slightly over 3 months of imports. However, the deficit is projected to widen in 2024 to 6% of GDP as remittances normalize and imports increase. Over the medium term, it is expected to converge to 5.5% of GDP as the services trade balance improves. The fiscal deficit in 2023, including budget lending, was 2.4% of GDP, surpassing the budgeted deficit of 2.8%, mainly due to higher revenues. The 2024 budget aims for a deficit of 2.5% of GDP, with increased revenues from corporate income tax for banks and new gambling taxes funding higher expenditures. These include increased wages, social benefits, and capital investments. Public debt is projected to remain below 40% of GDP both in 2024 and over the medium term. Inflation experienced a significant decline throughout 2023, ending the year at 0.4 percent. This drop was facilitated by a robust lari, reduced commodity prices, and a firm monetary policy approach. In response, the National Bank of Georgia (NBG) has gradually reduced its policy rate by a total of 275 basis points since May 2023, reaching 8.25 percent by March. However, inflation is projected to rise to 4 percent by the close of 2024, as the positive impact of last year's external factors diminishes and the tightness of monetary policy is relaxed. Over the medium term, inflation is anticipated to revert to its target level.

The Georgian unemployment rate is still high: it was estimated at 18.4% in 2023 and is expected to reach 18.6% by 2024, also due to the increased number of immigrants joining the labor market, before easing in 2025. According to the latest figures from GeoStat, 15.6% of the population was living below the absolute poverty line in 2022: Inequalities remain high compared to other economies in the region, with low levels of education and a rural population (40% of the total – World Bank). Overall, the average GDP per capita (PPP) was estimated at USD 20,172 in 2022 by the World Bank.

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