Georgia: A farmer repairing a combine harvester

Economic situation Business climate successfully improved

Since the collapse of the Soviet Union, Georgia's economy has undergone a far-reaching transformation towards a social market economy.

In the period from 2017 to 2019, annual economic growth was about 5 per cent. In 2020, the country experienced an economic downturn as a result of the COVID-19 pandemic (minus 6.8 per cent). Georgia was particularly hard hit by the travel restrictions. In 2020, revenues from tourism fell by 80 per cent. However, recovery is in sight. The overall growth rate in 2021 was one of the highest worldwide – 10.6 per cent. The upswing reached all sectors (trade, services, manufacturing) except for construction.

However, the majority of the population benefits very little from this generally positive trend of economic development. Some 40 per cent of people work in agriculture, producing primarily in order to meet their own needs. The development of agriculture is being hampered by inefficient land use, poor infrastructure, the low quality of processed agricultural goods and poor training. The government has therefore announced that it will undertake targeted action to strengthen the agricultural sector and develop the food processing industry. There are also plans for large public investments in infrastructure (road construction, water and sanitation systems, and power supply).

Development potential

National park in Georgia

National park in Georgia

National park in Georgia

Georgia has great development potential. One major factor is the transport of oil and gas from the Caspian region to the EU. The country also has its own deposits of extractive resources, such as manganese and gold. Its abundance of water and other renewable energy sources (wind and sun) offers far-reaching potential for Georgia not only to meet its own energy requirements but also to export energy.

The scenic beauty and biodiversity of the Caucasus also harbours great potential for further expanding international tourism.

Environmental challenges

Georgia is faced with significant environmental challenges. They include deforestation, soil erosion, biodiversity loss, inadequate waste and wastewater management (resulting in litter and pollution on land and in bodies of water), and – especially in Tbilisi – extreme levels of air pollution. However, in view of the major social challenges and the immense economic impacts of the COVID-19 pandemic and the war in Ukraine, neither the people nor the government are considering environmental issues a matter of top priority.

Yet action is urgently needed, as the situation will be further exacerbated by climate change. Environmental degradation also has a direct impact on the foundations of the rural economy (tourism, agriculture, energy).

As at: 08/06/2022