The World Bank in Georgia

Country Context

Source: Geostat

Georgia has made notable gains in income growth and poverty reduction over the past decade. As a result of sound macroeconomic management, GNI per capita (constant $ 2015) increased from $3,036 in 2010 to $5,702 in 2023. Poverty (measured by $6.85 poverty line in 2017 PPP) declined from 70.6% in 2010 to preliminary estimated 35.5% in 2024. The job market experienced a strong recovery, with unemployment falling from 20.6% in 2021 to 13.9% as of end-2024, supported by the fast growth rates in recent years.

Nevertheless, structural challenges persist, notably weak productivity and limited high-quality job creation. About a third of workers remain engaged in low-productivity agriculture. Georgia also has a large share of self-employed in other sectors. Access to finance remains a major obstacle for small and medium-sized enterprises (SMEs), while skills mismatches are reported to be an impediment for most firms. Due to its high degree of trade openness and dependence on tourism, Georgia is vulnerable to external shocks. In December 2023, Georgia was granted candidate status by the European Union (EU). However, the government’s November 2024 announcement on the suspension of EU accession talks until 2028 triggered civil unrest and impacted on business confidence. Maintaining reform momentum will be essential for maintaining robust growth.

Last Updated: Apr 24, 2025

Strategy

The current active lending portfolio of $1.1 billion includes nine operations. A major part of the current portfolio (45%) is committed to human capital development (including health, education and social protection), 24% to transport and the remaining 41% to digital development; regional connectivity; energy; irrigation; agriculture and land; entrepreneurship and innovation; as well as support to micro-small-and medium enterprises. 

The last Country Partnership Framework (CPF) covered FY19 – 23 and preparation of the next CPF was halted last year due to political upheaval and impending elections.

The Georgia-specific Advisory Services and Analytics (ASA) program addresses a broad range of development challenges, helps to shape the future cooperation with the client by identifying potential areas of collaboration, and provides recommendations to help the client mitigate the challenges identified through ASA. The ASA program in Georgia includes the upcoming Country Climate and Development Report—planned to be delivered in FY26—which is expected to help Georgia prioritize the most impactful actions that can reduce greenhouse gas (GHG) emissions and boost adaptation and resilience, while delivering on broader development goals. An active program of 11 trust funds totaling $5.8 million supports institutional capacity building, poverty, agriculture, water and land, finance, energy, governance and digital sectors.  

Last Updated: Apr 24, 2025

Recent Economic Developments

Despite some deceleration toward the end of the year, Georgia’s economy expanded by 9.4% in real terms in 2024. Robust domestic demand was driven by real wages and by strong real credit growth. On the supply side, growth was broad-based, driven by services, such as IT, education and public services. Annual inflation increased to 3.5% in March 2025, with food and healthcare as the top contributors. The policy rate was reduced to 8% in early 2024 and has remained unchanged given inflationary pressures.

The current account deficit narrowed from 5.6% of GDP in 2023 to 4.4% in 2024. Services drove the improvement, but the goods trade balance worsened. Workers’ remittances fell 14.2% (YoY) in 2024, due to falling inflows from Russia, which were only partly offset by rising remittances from the EU and the US. Net foreign direct investment inflows fell from 5.2% of GDP in 2023 to 2.7% of GDP, reflecting weaker investor confidence. 

Fiscal performance was strong, with a deficit of 2.9% of GDP in 2024, 18% increase in tax revenues, and 11.3% rise in capital expenditure. Public debt was 36.1% of GDP by end-2024. 

Economic Outlook 

Georgia’s growth is projected to slow to 5.5% in 2025 and converge to 5.0% over the medium term, reflecting weaker consumption, investment and external demand. As remittances from Russia dwindle and exports slow down, the current account deficit is forecast to widen to 5.7% of GDP in 2025 and stabilize in the medium term. On the fiscal side, revenue collection is projected to remain robust in the medium term, at around 27.9% of GDP, supported by enhanced digitalization of VAT collection, streamlined labor tax, and progressive formalization of the economy. Total expenditure is expected to remain at around 30.5% of GDP, while the fiscal deficit is projected to stay below 3% of GDP in the medium term, in line with the fiscal rule.

Risks to the outlook are tilted to the downside. Heightened global uncertainty and shifts in trade policy could further weigh on Georgia’s economic activity through spillover effects. Domestic tensions and polarization, which intensified in Q4 2024, are expected to continue, potentially impacting economic activity, tourism, and investor confidence. On the upside, the reopening of the Azerbaijan border could boost trade and tourism inflows.

Last Updated: Apr 24, 2025