Tbilisi, Georgia – TBC Capital has released an updated assessment of the impact of ongoing developments in the Middle East on Georgia’s economy, based on the latest high-frequency indicators.
At this stage, no significant changes have been observed. However, given today’s ceasefire agreement, the situation may evolve rapidly. TBC Capital will continue to monitor developments closely and provide detailed analysis in upcoming publications. The full set of indicators is available in the annex to the complete report.
Georgia Records First-Ever Current Account Surplus
From a structural perspective, in line with TBC Capital’s expectations, Georgia recorded a current account surplus in 2025 for the first time. Excluding reinvested earnings, the surplus amounted to USD 82 million, or 0.2% of GDP. While modest in size, this marks a significant milestone for the country’s external balance.
In practical terms, a current account surplus means that Georgia has become a net creditor to the rest of the world. In other words, residents’ foreign currency income exceeded their expenditures abroad over the past year. The current account reflects whether a country earns more or spends more in its economic relations with the rest of the world, including trade in goods and services and financial flows such as remittances, compensation, dividends, reinvestment, and interest payments.
By definition, the financial account mirrors how this surplus is deployed abroad or how a deficit would be financed—through instruments such as foreign direct investment (FDI) or portfolio investments.
Sustained Positive Trend Since 2022
Prior to 2025, a seasonally adjusted current account surplus had been recorded only once—in Q3 2022, shortly after the outbreak of the Russia-Ukraine War. In 2025, however, the current account remained in surplus for three consecutive quarters starting from Q2.
This trend was one of the key factors supporting the Georgian lari exchange rate last year, as repeatedly highlighted in TBC Capital’s publications. Additionally, excess supply in the foreign exchange market at the beginning of the year has contributed to the lari’s current stability, despite ongoing developments in the Middle East.
Key Drivers of External Balance Improvement
The improvement in Georgia’s external balance was driven by both declining outflows and resilient inflows:
- Outflows: Major components—imports of goods and services, dividends, and interest expenses—declined from 50.4% of GDP in 2024 to 47.8% in 2025.
- Inflows: Exports of ICT services increased significantly, rising from 1.8% to 2.8% of GDP. Meanwhile, key inflows—goods exports, tourism revenues, and remittances—slightly decreased from 46.1% to 45.2% of GDP.
Financial Account Developments
Foreign direct investment (FDI), excluding reinvested earnings, remained low in 2025 at 0.8% of GDP, similar to previous years. Including reinvestment, the main sources of FDI were:
- European Union – 31%
- United Kingdom – 20%
- Turkey – 11%
By sector, FDI was primarily concentrated in:
- Financial and insurance activities – 36%
- Real estate – 11%
- Logistics – 10%
Rising Portfolio Investments Abroad
The trend of Georgian residents investing in foreign assets continued. As of December, residents held USD 4.8 billion in foreign assets, equivalent to 12.7% of GDP.
The structure of these investments has also evolved. While in 2024 commercial banks were the main buyers of foreign debt securities, in 2025 the non-banking private sector became more active, particularly in acquiring listed equities and investment fund shares.
Decline in Net External Debt
In 2025, Georgia’s net external borrowing declined for the first time since 2013, driven by a reduction in private sector debt, while government debt increased slightly.
Growth in Foreign Exchange Reserves
Against this backdrop, Georgia’s gross international reserves increased by USD 1.7 billion in 2025, including USD 500 million driven by rising gold prices.
The growth continued in the first two months of 2026, adding another USD 500 million, although reserves declined by USD 343 million in March, partly due to a drop in gold prices.
As of end-March, net international reserves—excluding IMF Special Drawing Rights (USD 475 million)—are estimated at USD 3.5 billion, representing a 204% year-on-year increase, according to TBC Capital.
