Georgia’s most important sectors of the economy are agriculture, mining (manganese and copper) and manufacturing. Since the change of the government in 2003, the country has embarked on reforms aimed at the liberalization of the economy. As a result, in recent years Georgia’s economy has been steadily growing. Due to precarious relations with Russia, Georgia has invested in energy independence by focusing on hydropowers. Georgia is also attempting to use its key geographical location to become a logistics & transits hub.


The dynamics of the quarterly growth of the last few years reveal slower economic activity. If in the fourth quarter of 2013, the economic growth rate equalled 7.6 % compared to the previous year’s figure, during the last 2016-17 quarters this indicator has stood at only 2.6 % on average, representing a very low indicator for a developing economy like Georgia. If in 2015, the average annual growth rate for loans issued to national economy equaled 31. 9%, in the first 7 months of 2016, the loans were growing only by 9.3 % on average. It should be noted, that based on the sectors, the fastest growing loans were issued to construction (31. 2%) and hotels and restaurants 18.5 %), while loans issued to trade and 10. GEORGIAN ECONOMIC OUTLOOK 2016 transportation and communications significantly decreased with average indicators of 8.5 % and 11.4 %, respectively. 


Key challenges that Georgia is facing are: first, is the modest export base. Traditional agriculture and established industries such as metals will not be enough to support Georgia’s export in a rapidly changing global economy. New sectors are emerging, especially tourism and transportation. But are competing against countries that are pursuing the same goal.


The Deep and Comprehensive Free Trade Agreement with the European Union should boost economic diversification by opening new markets. But that alone will not be enough. Mobilizing domestic savings to boost investment will also be important to support more balanced growth.


The second challenge is in the job market, where unemployment and underemployment remain at high levels. Almost half of the country’s labor force is employed in agriculture. Too many people are counted among the long-term unemployed.


This problem contributes to the wide inequality in Georgian society. Further reforms are needed to promote more inclusive growth.


As the economy continues to evolve, this problem will become more complicated. What is required is a serious government effort, perhaps including improved job-search and job-matching services.


The EU and Georgia signed the Association Agreement in 2014. In terms of preferential market access Georgia benefits from GSP+, a special incentive which rewards sustainable development and good governance (GSP+) with advantageous access to the EU market. Given the deep and comprehensive free trade area (DCFTA) the EU and Georgia have established, DSP+ will apply to Georgia until 31 August 2016. This transition period allows business to adjust to the new preferential trade provided by the DCFTA. The agreement is designed to gradually introduce European standards in all sectors of Georgia’s economy and foster sectorial changes - in infrastructure, energy, the environment, agriculture, tourism, technological development, employment and social policy, health protection, education, culture, civil society, regional development and so on. It also provides for the approximation and harmonizations of the Georgian laws with nearly 300 items of European legislation.


Georgia is also a partner country of the Eastern Partnership within the European Neighbourhood Policy. In 2014, the EU and Georgia agreed on the priorities for reform in Georgia. The set priorities are based on the new Association Agreement between the EU and Georgia. Georgia is a member of the World Trade Organisation since 2000.