Georgia

Moderating growth after three years of strong expansion

After three consecutive years of rapid expansion, Georgia’s economy is projected to progressively return to its growth potential in 2025 and 2026. Real GDP grew by 9.4% in 2024, supported by robust household and government consumption. For 2025 and 2026, growth is expected to slow down. Private consumption (71% of GDP) remains the main growth driver, supported by strong employment, consumer lending, and continued real wage increases. However, the extraordinary demand impulse from the inflow of Russian immigrants and money in 2022-2023 is fading, thus removing its temporary support to domestic demand. Importantly, remittance flows (6,3% of GDP in 2024), which have supported household incomes, are set to weaken further given the stagnation of the Russian economy and tightened migration channels. This will remove a tailwind that buoys consumption in Georgia. Similarly, investment from abroad may slacken due to political uncertainty. However, the government prioritises investments in transport, logistics, energy and digital infrastructure to advance its role in the Middle Corridor linking China and Europe. Furthermore, public and private investments in the construction sector should result in fundamental growth stimulus, especially in relation to tourism.

On the external front, exports are likely to lose some momentum. Tourism revenues should remain a pillar since Georgia has recovered to pre-pandemic tourist numbers. Goods export prospects are mixed, slower growth in key trading partners (EU, Turkey) and Russia’s economic weakness could soften demand for Georgian products such as metals, agricultural goods, food and beverages. Moreover, the “re-export boom” (e.g., of used cars and machinery officially destined to some Eurasian markets, but remaining in Russia) that supported recent trade figures may not be sustained in the event of change to regulatory conditions related to US/EU sanctions against Russia (officially enforced by Georgia since 2023).

Inflation dynamics have shifted after the unusually low outcome in 2024. Average consumer price inflation fell to just 1.1% in 2024 thanks to the strong currency and cheaper imports, only to rise again in early 2025. Inflation is expected to average around 4% in 2025 before stabilising back towards the National Bank of Georgia’s 3% target in 2026 helped by stable and fitting anticipations. The National Bank of Georgia is likely to maintain its conservative monetary policy stance. With inflation near target, it may cautiously ease monetary policy if external conditions allow, but any easing will be limited to avoid price pressures exercised by a weakening lari: half of the consumption basket is imported. Stable inflation of around 3% will also support real incomes and help maintain consumer and investor confidence.

Healthy public accounts

Public finances remain under control. The authorities have signalled their commitment to the fiscal rule. Thus, no major fiscal deviation is anticipated. The government deficit was 2.1% of GDP in 2024, which is lower than expected, and was supported by strong revenue growth from taxes on income, consumption, and newly introduced levies such as gambling duties. Expenditure rose due to election-related spending, but overall fiscal policy remained prudent. For 2025 and 2026, deficits should remain well below the statutory ceiling of 3%, implying government spending will not be a major growth driver. Public debt fell to 36.1% of GDP in 2024 and the ratio is expected to decline slightly further, consolidating the recovery from the pandemic shock. The debt profile remains favourable, but the high share denominated in foreign currency (75%) exposes the state balance sheet to exchange-rate risks.

Georgia continues to run a current account deficit, though it has narrowed from 2023 (-5.6%) to 2024 (4.6%) due to strong services exports and a rebound in goods exports such as metals and re-exported cars. However, the current account deficit is projected to widen moderately around the range of -5% of GDP as imports accelerate with domestic investment needs, while export growth will plateau. Financing will rely on foreign direct investment and other capital inflows, but here risks are visible: FDI declined in 2024 amid political uncertainty, and, unless reforms resume, external financing could remain subdued. Furthermore, foreign exchange reserves are modest at only around 2.6-3 months of imports, leading to frequent interventions of the National Bank to prevent volatility within shallow foreign exchange markets. In addition, gross external debt stands at 75% of GDP, while the share of the public sector amounts to 32.1% of GDP. Banks are mainly behind private external debts with 24.7% of GDP, while non-bank corporates cover 14.8%. Households have little exposure to external borrowing. Their FX exposure is mainly domestic through loans from Georgian banks denominated in foreign currency.

Domestic polarisation and EU accession uncertainty

Georgia faces elevated political risks due to deep domestic polarisation and contested democratic standards. The October 2024 parliamentary elections triggered a legitimation crisis. While the ruling Georgian Dream (GD) party claimed victory, the opposition alleged fraud and is boycotting parliament, sparking mass protests and weakening institutional stability. Governance concerns persist, including attempts to curb media and civil society as well as the continued influence of oligarchic actors. Additionally, legislation introduced in 2025 makes it easier to ban opposition parties, granting the Constitutional Court powers to dissolve groups, though no final bans have yet been enacted. Although the EU granted Georgia candidate status in late 2023, reforms have stalled and the government has even suspended EU-related efforts until 2028, raising doubts about the country’s integration path. Public opinion in Georgia remains strongly pro-European and any perception of backtracking risks further polarisation. However, the near 50% share secured by GD in the 2024 vote was the result of the fragmented and weakened opposition, the party’s official pro-EU stance combined with a “peace-first” message and widespread public concerns about provoking Russia.

The geopolitical environment remains fragile. Russia continues to occupy 20% of Georgia’s internationally recognised territory, including Abkhazia and South Ossetia. Periodic border incidents underline the constant threat of escalation. While a large-scale renewed war is unlikely while Russia is engaged in Ukraine, the shelved conflicts remain a lever of pressure and a barrier to NATO membership.

Last updated: September 2025