Country Context



Population, million


GDP, current US$ billion


GDP per capita, current US$


Poverty rate ($5/day 2005PPP terms)


Life Expectancy at birth, years


Since the beginning of 2014, Georgia has been hit by large and potentially long-lasting external shocks. Lower oil and commodity prices, a decrease in remittances and capital inflows, and reduced exports have slowed growth, factors that also made the economy more vulnerable in 2015. However, tourism has remained resilient, as the number of tourists visiting Georgia has significantly increased since 2014.

Georgia is striving to become a go-to trade and logistics hub. Although the country has done well on the Doing Business index, there are pending gaps that the Government is committed to addressing.

In February 2016, the Prime Minister of Georgia introduced his four-point reform program to address economic vulnerabilities and external shocks to the economy. This economic development plan includes new tax benefits, improved infrastructure, governance reforms, and an overhaul to the education system.

In keeping with the European Union–Georgia Association Agreement that came into force in July 2016, the Government plans to harness the gains of deeper integration by promoting the reallocation of capital and labor to more productive industries, building supporting firms to comply with the harmonization of the legal and regulatory frameworks, and upgrading state institutions to improve trade facilitation, reduce technical barriers to trade, protect intellectual property rights, and develop the country’s human capital. 


Last Updated: Oct 04, 2016


Number of active projects



$739 million


$582 million


$157 million

The World Bank Group has been a key development partner for Georgia since 1992, supporting investment projects and the reform agenda in almost every sector. In 2014, Georgia graduated from the International Development Association (IDA) to become an International Bank for Reconstruction and Development (IBRD)-only borrower, and it has recently moved from the lower-middle-income to the upper-middle-income country classification.

The overarching objective of the current Country Partnership Strategy (CPS) for FY2014–17 is to achieve faster, inclusive, and sustainable growth while seeking a greater focus on social outcomes and poverty reduction. To achieve this objective, the two strategic areas of focus are (i) strengthening public service delivery to promote inclusive growth and (ii) enabling private sector–led job creation to improve competitiveness. 

Key Engagement

Although the World Bank’s program covers various sectors, providing infrastructure and services to facilitate growth remains a key engagement area. Overall, the Bank has provided over US$860 million to the road sector of Georgia and plans to continue this financing in the coming years. Ongoing Bank-financed investments in Georgia’s transport sector include five projects with total commitments of US$400 million. 

Georgia is a transit country connecting several important economic regions. The Caucasus Transit Corridor (CTC) is a key transit route between Western Europe and Central Asia for the transportation of oil and gas as well as dry cargo. The East-West Highway (EWH) traversing Georgia is part of the CTC and carries over 60% of total foreign trade. 

The World Bank has financed five road improvement projects (with total commitments of US$507 million) along the EWH to complement the Government's initial investment from Tbilisi, and financing is also being provided by other international financial institutions. Approximately 160.5 kilometers (km) of the EWH have already been upgraded, of which 96 km were funded by the World Bank. Work is ongoing to complete an additional 177 km by 2016 with the support of the World Bank, the Asian Development Bank, the European Investment Bank, and the Japanese International Cooperation Agency. 

In addition to investments in the EWH, the Bank has also financed numerous sections of the regional as well as secondary and local roads network throughout Georgia. 

Some notable achievements under this engagement include a reduction in travel time by 30–50% and in vehicle operating costs by 10–27% on the rehabilitated sections of roads on the EWH and the secondary and local roads, respectively.

In addition, road construction and rehabilitation has created a significant number of temporary jobs that have favorably affected unemployment and poverty reduction. Real GDP is expected to increase by 1.5% over the medium-term horizon and 4.2% over the long term. Both exports and imports are expected to expand in the long run.

Infrastructure development contributes to growth in the welfare of all categories of households. These investments also improve the ability of small businesses to connect to global markets, multiplying the impact of investments that Georgia is making to expand their use of information and communications technology (ICT) services, including e-commerce. 


Last Updated: Oct 04, 2016



Exports and remittances declined in the first half of 2016 amid a weak external environment marked by low commodity prices. In contrast, the construction and other non-tradable sectors grew by 26%, pushing the GDP growth rate for the first half of 2016 to 2.9%.

The unemployment rate declined marginally from 12.4% in 2014 to 12% in 2015, with jobs slightly shifting toward services and away from agriculture. With economic growth below potential and low inflation, the National Bank of Georgia reduced its policy rate to 6.5% in September. Prudent supervision reinforces the stability of the banking sector, with nonperforming loans amounting to 2.3% of all loans in July 2016. 

The decline in exports and remittances, coupled with the slow adjustment of imports, widened the current account deficit from 12% of GDP in 2015 to 13% in the first quarter of 2016. Foreign direct investment (FDI) has financed nearly 85% of this year’s current account deficit, while reserve assets have covered the rest.

External debt declined from 107% of GDP in 2015 to 100% in the first quarter of 2016, after US$675 million in intercompany loans was written off. In an effort to support growth, the Government boosted both capital and current spending, thereby widening the fiscal deficit to 2.5% of GDP.  

There has been significant progress in poverty reduction and shared prosperity in recent years. The poverty rate, estimated using the US$2.5/day PPP poverty line, fell from 46.7% in 2010 to 31.2% in 2015. During 2013–14, poverty reduction was largely driven by a combination of strong growth in the construction and non-tradable sectors, contrasting with 2010–13, when income growth among the poor was mostly driven by increased social transfers. Despite significant gains in agricultural incomes, poverty remains higher in rural areas.

Economic Outlook

With the significant increase in government spending in the run-up to the October parliamentary elections, growth is likely to pick up to 3.4% in 2016. External markets will likely remain weak, resulting in a large current account deficit of close to 12% of GDP during 2016–17. Greater policy certainty following the elections, a modest recovery in external markets, and strong FDI inflows are projected to boost the GDP growth rate to 5% in 2017–18. The current account deficit is expected to narrow gradually in the outer years. 

The fiscal deficit is expected to be between 4 and 5% of GDP in 2016 because of increased social spending and expenditures and the adoption of the corporate dividend tax model. In the absence of major consolidation measures, the deficit is expected to remain elevated over the medium term and to increase public debt.

The poverty rate is projected to continue declining through 2018. Construction activity, supported by anticipated investments and the growth of tourism, is expected to drive poverty reduction through increased job opportunities among the less skilled. The rise in real wages observed since 2010 is likely to continue, which should further reduce poverty, especially in urban areas.

The expected increase in pensions will have a positive distributional effect, given that pensions represent close to 20% of income among the poor. Lower food prices in 2016 will positively impact the purchasing power of households at the bottom end of the income distribution.

Nevertheless, Georgia’s exposure to external shocks, fiscal pressures, elevated rural poverty, and high rates of unemployment pose important challenges to the Government’s economic development and poverty reduction objectives. Going forward, the Government will need to better manage aggregate demand through lower deficits, minimize contingent liabilities, better target social programs, and prioritize public expenditures. 


Last Updated: Oct 04, 2016

Highlighted Project

Georgia National Innovation Ecosystem (GENIE). Since the early 2000s, Georgia has been implementing far-reaching reforms to improve the business environment, spur investment, and shake off the lingering rigidities of a centrally planned economy. These reforms have helped to kick-start GDP growth. 

The sustainability of this growth in the medium term is tenuous, amid slowing productivity growth, depressed external demand, and declining export competitiveness. Prospects for a resurgence in productivity growth and exports are constrained by low levels of innovation, human capital development, and entrepreneurship.

The rural economy is also lagging behind, trapped by low productivity in agriculture. To address these challenges, the Government seeks to promote inclusive growth and develop an innovation-driven and knowledge-based economy, which is the focus of the Georgia National Innovation Ecosystem (GENIE) project, financed by the World Bank through a US$40 million IBRD loan approved by the Board in March 2016. 

The Project Development Objective is to increase the innovative activities of firms and individuals across Georgia and their participation in the digital economy. The Project will help to increase jobs, productivity growth, and export competitiveness in Georgia. The Innovation Infrastructure component will support the development of a hub-and-spoke network of innovation centers across Georgia, as well as an increase in the use of broadband Internet services among rural households and micro, small, and medium-sized enterprises (MSMEs).


The Innovation Services component will support innovation competitions, digital economy skills development, and innovation capacity building for firms and individuals. The Innovation Financing component will provide matching grants to start-ups and firms to undertake innovative projects.

GENIE represents a new phase in the Bank’s engagement with the Government. Building on the widespread reforms undertaken and leveraging investments that help improve core infrastructure, the Project seeks to foster new sources of growth by connecting and equipping people and businesses across Georgia to the global innovation and digital economy.


Last Updated: Oct 04, 2016


Georgia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments