Economic growth in Georgia is projected to decelerate due to political instability, as indicated by a decrease in business confidence.
Georgia's economy experienced a significant boost in 2024, with the country's GDP surging by 9.4%. This growth was driven by a combination of factors, including robust domestic demand, a strategic geopolitical position, and strong service exports, particularly from the tourism sector.
The current account deficit narrowed to 4.3% of the GDP in 2024, supported by these stronger service exports. However, it is projected that import demand will outpace export growth in the coming years, leading to a slight widening of the current account deficit.
One of the key factors contributing to Georgia's economic growth has been the reallocation of services and trade routes away from Russia. This shift has resulted in a notable influx of Russian migrants, particularly high-skilled professionals in sectors like IT, benefiting Georgia.
Investment also grew sharply in 2024, bolstered by favourable business lending conditions and strong public infrastructure spending. Real wages in Georgia jumped by 15% in 2024, a result of both economic expansion and rising living costs, particularly housing.
Private consumption is forecasted to remain the primary driver of Georgia's economy, backed by ongoing real wage increases and dynamic consumer credit. The employment rate in Georgia rose by 2.5 percentage points to 47.1% in 2024.
The European Commission's latest European Economic Forecast attributes Georgia's continued momentum to these robust domestic demand factors and the country's strategic position amidst geopolitical shifts driven by Russia's war in Ukraine.
Despite this positive outlook, the report warns of "unusually high uncertainty" due to domestic political developments and regional geopolitical tensions. Business confidence has weakened significantly in early 2025 in Georgia, reflecting the country's escalating political tensions.
The government of Georgia posted a 2.1% of GDP deficit in 2024, below the 2.5% budgeted level, thanks to a surge in tax revenues. Increased income tax, gambling fees, and banking sector levies contributed to this revenue surge. Public expenditure in Georgia rose in 2024, particularly on salaries and interest payments, but the overall budget balance remained within the fiscal rule ceiling.
Net exports contributed negatively to Georgia's growth in 2024 as rising imports outpaced export gains. Unemployment in Georgia dropped from 16.4% in 2023 to 13.9% in 2024, and is forecast to decline further, though at a slower rate.
Looking ahead, Georgia's economy is expected to decelerate in 2025 and 2026, but maintain a solid pace of expansion at 5-6%. Public investment is set to stay strong in Georgia. The public debt-to-GDP ratio in Georgia stood at 36.1% at the end of 2024, and is expected to continue declining.
In conclusion, Georgia's economy has shown remarkable resilience and growth in 2024, driven by robust domestic demand, strategic geopolitical positioning, and strong service exports. While there are challenges ahead, particularly in terms of political stability and geopolitical tensions, the overall outlook for Georgia's economy remains broadly positive.
Business growth in Georgia was significantly fueled by investment, which surged in 2024, owing to favorable lending conditions and public infrastructure spending. Moreover, the financial sector saw an increase in tax revenues, with income tax, gambling fees, and banking sector levies contributing to this surge, resulting in a government deficit that was lower than the budgeted level.
