Georgia’s economy is expected to decelerate after a year of exceptionally strong growth, but maintain a solid pace of expansion at 5-6% in 2025 and 2026, based on the European Commission’s latest European Economic Forecast. The report attributes continued momentum to robust domestic demand and the country’s strategic position amidst geopolitical shifts driven by Russia’s war in Ukraine.
In 2024, Georgia’s GDP surged by 9.4%, powered largely by rising private and public consumption, fueled by wage hikes, employment gains, and growing consumer lending. Investment also grew sharply, supported by favorable business lending conditions and strong public infrastructure spending. However, net exports contributed negatively to growth as rising imports outpaced export gains.
The Commission notes that Georgia continues to benefit from the reallocation of services and trade routes away from Russia, including a notable influx of Russian migrants—particularly high-skilled professionals in sectors like IT.
Despite the expected slowdown in growth, the economic outlook remains positive, with private consumption forecasted to remain the primary driver, backed by ongoing real wage increases and dynamic consumer credit. Public investment is set to stay strong, though business confidence has weakened significantly in early 2025, reflecting the country’s escalating political tensions.
Inflation and Employment Outlook
Inflation, which fell to 1.1% in 2024 due to prudent monetary policy and subdued imported inflation, is expected to rise to an average of 4% in 2025, before gradually easing back toward the National Bank’s 3% target in 2026. The current price uptick is driven by wage pressures, exchange rate depreciation, and base effects.
Meanwhile, Georgia’s labor market showed notable improvement. Unemployment dropped from 16.4% in 2023 to 13.9% in 2024, and is forecast to decline further, though at a slower rate. The employment rate rose by 2.5 percentage points to 47.1%, and real wages jumped by 15%—a result of both economic expansion and rising living costs, particularly housing.
External and Fiscal Position
Georgia’s current account deficit narrowed to 4.3% of GDP in 2024, supported by stronger service exports—especially from tourism—and a lower net outflow of investment income. However, the deficit is expected to widen slightly in the coming years, as strong import demand is projected to outpace export growth, despite continued gains from tourism.
On the fiscal front, the government posted a 2.1% of GDP deficit in 2024—below the 2.5% budgeted level—thanks to a surge in tax revenues, including increased income tax, gambling fees, and banking sector levies. Although public expenditure also rose, particularly on salaries and interest payments, the overall budget balance remained within the fiscal rule ceiling. The general government deficit is forecast to stay near 2% of GDP in 2025–2026, while the public debt-to-GDP ratio, which stood at 36.1% at the end of 2024, is expected to continue declining.
Risks Remain
While the economic outlook remains broadly positive, the report warns of “unusually high uncertainty” stemming from domestic political developments and regional geopolitical tensions, which may negatively impact business sentiment and consumer confidence.
Source: European Economic Forecast, Spring 2025 – European Commission
