Georgia, located at the crossroads of Western Asia and Eastern Europe, is a small but open market that derives benefits from international trade, tourism, and transportation. While it is susceptible to global and regional shocks, the country has made sweeping economic reforms since 1991 that have produced a relatively well-functioning and stable market economy. Average growth rate was over 5 percent from 2005 through 2019, and its rankings improved impressively in global business, governance, corruption, and other indexes. Georgia ranks seventh in the 2020 World Bank’s Ease of Doing Business index, twelfth in the Heritage Foundations’ 2021 Economic Freedom Index, eighth in the Economic Freedom of the World of Frazer Institute, and 45th in Transparency International’s Corruption Perception Index. Fiscal and monetary policy are focused on low deficits, low inflation, and a floating real exchange rate, although the latter has been affected by regional developments, including sanctions on Russia, and other external factors, such as a stronger dollar.
The COVID-19 pandemic has reversed some of the past gains and has placed significant pressure on the domestic currency and local economy. Georgia’s economy contracted 6 percent in 2020 with particularly steep losses in the tourism sector. According to the World Bank’s assessment , Georgia “has a sound macroeconomic framework, an attractive business environment, and robust public financial management arrangements that are expected to support the post-COVID recovery. Georgia’s governance indicators typically exceed Europe and Central Asia and upper-middle-income country averages.”
The Georgian Government Program 2021-2024 Toward Building a European State , published in December 2020, outlines economic policy priorities to enable the country to quickly recover and return to its economic position in 2019-2020. It stresses the government’s commitment to property right protection and business-friendly policies, such as low taxes, but also pledges to invest in human capital and to strive for inclusive growth across the country. The program also emphasizes Georgia’s geographic potential as a trade and logistics hub along the New Silk Road linking Asia and Europe via the Caucasus.
Overall, business and investment conditions are sound. However, there is an increasing lack of confidence in the judicial sector’s ability to adjudicate commercial cases independently or in a timely, competent manner, with some business dispute cases languishing in the court system for years. Other companies complain of inefficient decision-making processes at the municipal level, shortcomings in the enforcement of intellectual property rights, lack of effective anti-trust policies, accusations of political meddling, selective enforcement of laws and regulations, including commercial laws, and difficulties resolving disputes over property rights. The Georgian government continues to work to address these issues, and despite these remaining challenges, Georgia ranks high in the region as a good place to do business.
The United States and Georgia work to increase bilateral trade and investment through a High-Level Dialogue on Trade and Investment and through the U.S.-Georgia Strategic Partnership Commission’s Economic, Energy, and Trade Working Group. Both countries signed a Bilateral Investment Treaty in 1994, and Georgia is eligible to export many products duty-free to the United States under the Generalized System of Preferences (GSP) program.
Georgia suffered considerable instability in the immediate post-Soviet period. After regaining independence in 1991, civil war and separatist conflicts flared up along the Russian border in the Georgian territories of Abkhazia and South Ossetia. In August 2008, tensions in the region of South Ossetia culminated in a brief war between Russia and Georgia. Russia invaded and occupied the Georgian territories of Abkhazia and South Ossetia. Russia continues to occupy these Georgian regions, and the central government in Tbilisi does not have effective control over these areas. The United States supports Georgia’s sovereignty and territorial integrity within its internationally recognized borders and does not recognize the Abkhazia and South Ossetia regions of Georgia as independent. Tensions still exist both inside the occupied territories and near the administrative boundary lines, but other parts of Georgia, including Tbilisi, are not directly affected.
Transit and logistics are priority sectors as Georgia seeks to benefit from increased East/West trade through the country. The Baku-Tbilisi-Kars railroad has boosted Georgia’s transit prospects and the government has looked for ways to enhance trade. In 2016, the government awarded the contract to build a new port in Anaklia to a group of international investors, including a U.S. company. However, the government terminated its contract with the group for the development of a deep-sea port in 2020. The investor group alleges government actions against the project let to financial difficulties and eventual contract termination. Despite the government’s claim that it remains committed to the construction of a deep-sea port in Anaklia, investors and local business leaders doubt that commitment. Separately, logistics and port management companies in Poti and Batumi have started development and expansion of both the Batumi and Poti Ports. In 2020, logistics companies will complete two new terminal projects and a third will be underway – a multimodal terminal in Batumi and new terminals and increased storage in Poti, currently the largest port in Georgia with plans to increase deep-water capacity.
| Measure | Year | Index/Rank | Website Address |
|---|---|---|---|
| TI Corruption Perceptions Index | 2020 | 45 of 180 | http://www.transparency.org/research/cpi/overview |
| World Bank’s Doing Business Report | 2020 | 7 of 190 | http://www.doingbusiness.org/en/rankings |
| Global Innovation Index | 2019 | 63 of 131 | https://www.globalinnovationindex.org/analysis-indicator |
| U.S. FDI in partner country ($M USD, historical stock positions) | 2019 | N/A | https://apps.bea.gov/international/factsheet/ |
| World Bank GNI per capita | 2019 | 4,780 USD | http://data.worldbank.org/indicator/NY.GNP.PCAP.CD |