“Going forward, growth in Georgia will increasingly need to come from improvements in firm productivity and advancement in their ability to exploit opportunities in external markets. In addition, more active and better-skilled labor can help offset existing demographic trends and augment productivity.”
Over the past decade, Georgia has established a strong and widely acknowledged record of economic success thanks to prudent economic management and a top-notch investment climate. Georgia was the second fastest growing economy in Europe and Central Asia—5.2 percent on average in per capita terms during 2010-2019—and saw its poverty rate almost halved since during this period. However, the country’s future growth prospects will be impacted by an ageing population, incomplete structural transformation, stagnant firm-level productivity, skills gaps and mismatches, and increased global uncertainty.
The CEM aimed to assess the country’s growth prospects and identify key reforms for sustained growth, providing a strong evidence base for policy recommendations. For the first time, firm-level total factor productivity and mark-ups analyses were undertaken to gain insights on firm-level productivity and competitive pressures on Georgian markets. Additionally, the report represented one of the first attempts to shed light on the corporate sector’s energy footprint. The CEM also incorporated innovative data analysis techniques—web scrapping was leveraged for the analysis of jobs demand, and density and connectivity were mapped at the municipal level through spatial analyses.
An outstanding team of nearly 50 individuals from more than a dozen units across the World Bank and the International Finance Corporation produced the CEM. This team collaborated with colleagues working on financial sector and enterprise support projects as well as analytical and advisory activities in the areas of agriculture, trade and logistics, digital development, and human capital, among others. Preparation costs were $450,000, of which $200,000 came from the Umbrella for Trade Trust Fund.
The CEM team engaged with a wide range of stakeholders in preparing and disseminating the report, building on existing strong collaboration with Georgian institutions such as the National Statistics Office of Georgia, the Revenue Service, and various ministries. Thematic areas covered by the CEM included topics explicitly requested by Georgian authorities, but also areas that emerged from discussions with the private sector, including business associations and large exporters. The report was publicly launched on December 6, 2022 in a multi-stakeholder event.1
The report informs the ten-year strategy of the Government of Georgia and its implementation. The Ministry of Economy and Ministry of Finance has demonstrated strong willingness to partner with the World Bank to implement the recommendations of the CEM, including through budget support operations and investment operations. The CEM also provided a sound starting point for the preparation of the Georgia Systematic Country Diagnostic update, which will feature consultations and further debate around some of the findings in the CEM and will inform the preparation of the next World Bank Group Country Partnership Framework for Georgia.
[1] The CEM public launch was co-hosted by Levan Davitashvili, Vice Prime Minister and Minister of Economy and Sustainable Development of Georgia, and Lasha Khutsishvili, Minister of Finance of Georgia. It was attended by representatives of the Cabinet of Ministers, the parliament, development partners, business associations and private sector, civil society, think-tanks, academia, and the media.
