Economical overview
Georgia is rich in natural resources and
enjoys a favorable geographical location along the trade
route between the Caspian Sea and the Black Sea. There
are good conditions for fruit and wine growing and
tourism. However, armed conflicts, economic neglect and
corruption have hampered the transformation of a
declining centralized planning economy into a
functioning market economy.
Independence brought about an economic collapse for
Georgia when the subsidized exchange trade that
prevailed within the Soviet Union disappeared at one
time and the countries would start paying each other
with convertible currency and at world market prices.
The cost of energy imports went up while Georgian goods
were in many cases impossible to sell abroad. Production
collapsed in all sectors. In addition, the state's
inability to collect taxes resulted in large budget
deficits. Wages and pensions were frozen inside. The
situation was aggravated by political unrest and civil
war in South Ossetia and Abkhazia (see Modern History).
No other former communist state was affected by an
equally powerful economic race like Georgia.
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Only at the end of the 1990s did growth accelerate
through liberalization of the economy and extensive
privatization. Thanks to large construction projects for
oil and gas pipelines, revenues increased and Georgia
became an interesting investment country. Yet in 2003,
however, gross domestic product (GDP) corresponded to
only three-quarters of the level of the Soviet era and
much of the economic activity took place in the informal
sector, that is, various forms of black jobs.
Since Micheil Saakashvili became president in 2004, a
number of reforms have been implemented. The extensive
bureaucracy was lost, it became easier to start
businesses and to trade. A new tax system increased the
state's revenue while the government tried to reduce the
extensive corruption. Former officials accused of
corruption were arrested and forced to pay to be
released again, which also contributed to the Treasury.
The state's role in the economy was cut and a
comprehensive sale of state-owned enterprises was
carried out.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including GEO which represents the country of Georgia.
The reforms attracted foreign capital to Georgia,
which was the main reason for the record-high growth of
just over nine percent on average registered in
2004-2007. The loss of exports that resulted from
Russia's economic sanctions of 2006 (see Foreign Policy
and Defense) was offset to some extent by revenue from
the new oil and gas pipelines. However, the economic
upturn did not benefit everyone. While a small group
became very wealthy, a large part of Georgians continued
to live in poverty (see Social Conditions).
The inflow of capital also contributed to higher
inflation, while increased purchasing power for some led
to growing deficits in trade with foreign countries.
Growth slowed down in 2008 when Georgia was also hit
by the global financial crisis. The war with Russia the
same year (see Modern history) reinforced the decline.
In addition to the damage that occurred, the war
frightened foreign investors. Despite the billion aid
from the West that Georgia received after the war, the
outlook for the coming years was estimated to be bleak
with low or negative growth and increased unemployment.
In 2009, Georgia was promised a World Bank loan of up
to $ 900 million over three years. The money would be
used to rebuild after the war against Russia and to
strengthen the economy in the wake of the financial
crisis. In 2009, Georgia's GDP fell by almost four
percent.
Since then, the trend has reversed and the Georgian
economy has had stable growth of several percent each
year. Tourism has become increasingly important as a
source of income and the export figures for the wine
have grown. In both cases, however, Georgia remains
sensitive to deterioration in relations with Russia.
From there, a significant portion of tourists come and
go to the lion's share of wine exports.
Turkey is important as a recipient of Georgian export
goods, but despite a downturn in the Turkish economy in
2018, the Georgian has performed well. Armenia,
Azerbaijan and Bulgaria have grown as a trading partner
and goods exports increased by as much as 26 percent in
2018.
One sign of how dependence on Russia has also
diminished is that the transfers from Georgians working
in EU countries since 2018 are greater than the
transfers from those living in Russia.
FACTS - FINANCE
GDP per person
US $ 4,335 (2018)
Total GDP
US $ 16 210 million (2018)
GDP growth
4.7 percent (2018)
Agriculture's share of GDP
6.7 percent (2018)
Manufacturing industry's share of GDP
10.7 percent (2018)
The service sector's share of GDP
58.4 percent (2018)
Inflation
4.3 percent (2019)
Government debt's share of GDP
44.9 percent (2018)
External debt
US $ 15,756 million (2017)
Currency
lari
Merchandise exports
US $ 4,407 million (2018)
Imports
US $ 8,518 million (2018)
Current account
- US $ 1,246 million (2018)
Commodity trade's share of GDP
77 percent (2018)
Main export goods
metals, wine and fruits
Largest trading partner
Russia, Turkey, Azerbaijan
2012
December
Saakashvili refuses to sign amnesty law
Parliament adopts a law that recommends amnesty to those imprisoned under the
previous government for treason, participation in military uprising, espionage
on Russian behalf, robbery, fraud and theft; However, President Saakashvili
refuses to sign the amnesty law. He also says that Parliament's decision to
describe 190 interns as political prisoners portrays Georgia as a dictatorship
and is not serious.
More ex-ministers are arrested
A further two former ministers and four senior officials are arrested and
charged with various financial crimes under the previous government. Aleksandre
Chetaguri, who was Minister of Finance and Energy, and Nika Gvaramia, who was
Minister of Education and Minister of Justice, are prosecuted for, among other
things, spending the equivalent of a million dollars illegally, taking bribes,
falsifying documents and engaging in illegal business activities. President
Saakashvili describes the arrests as a sign of "lawlessness" under the new
government.
Amnesty law is being prepared for the old government prisoners
Decides that 190 prisoners should be classified as political prisoners and
that 25 Georgians living abroad should be designated as political refugees; Many
of these people are formerly high-ranking government employees who have been
imprisoned since Micheil Saakashvili came to power. A parliament spokesman says
that an amnesty law is being drafted and that all political prisoners will soon
be released.
November
The new government is holding onto the EU
Ivanishvili visits the EU in Brussels on his first trip abroad as head of
government. The visit is considered to mark that the new government also sees
contacts with the EU as its most important foreign policy priority. Many had
thought that Ivanishvili, who made his fortune in Russia, would care more about
contacts with Moscow.
Many legal cases against the previous government
Former Interior Minister Batjo Achalaia is being arrested and charged with
abuse of power, torture and unlawful detention of soldiers. He is alleged to
have physically and verbally abused six soldiers. Achalaia resigned in September
following the scandal of prisoner abuse in a prison in Tbilisi. Defense chief
Giorgi Kalandadze and one of the army brigade commanders are also being
prosecuted for the same reasons. Twelve former senior officials at the Interior
Ministry are arrested in the same tangle. They are accused, among other things,
of illegal telephone interception by former opposition parties, including the
current Prime Minister Ivanishvili. Parliament plans to set up a commission to
investigate "higher officials' crimes" during the Saakashvili government. NATO
chief Anders Fogh Rasmussen expresses "strong concern" over developments in
Georgia after the election.
October
Former football pros become a minister
Just over three weeks after the election, Parliament approves the new
government. Among the ministers are the former AC Milan football professional,
Kacha Kaladze, who will become Deputy Prime Minister and Minister of Regional
Development and Infrastructure.
The foreign policy course is fixed
Ivanishvili says that the country's foreign policy line is firm. He wants to
try new approaches to improve relations with Russia and try to establish a
dialogue with the breakaway republics. Membership in NATO remains as a
"strategic goal".
Billionaire Ivanishvili forms government
In the middle of the month, Ivanishvili regains his Georgian citizenship,
which he was deprived of at the end of 2011. He is also commissioned by
President Saakashvili to form a new government. Just over three weeks after the
election, the new government takes office.
Power change in parliamentary elections
Georgian dream wins in parliamentary elections. In total, the alliance
receives 85 seats against 65 for the National Movement. Saakashvili is praised
by the US and the EU for quickly recognizing the loss and promising a smooth
change of power.
September
Films from prison shake the government
Less than two weeks before the parliamentary elections, a film is broadcast
in opposition-supported TV channels the government is rocking. The film has been
taken to a prison in Tbilisi and shows how guards subject prisoners to gross
physical and sexual abuse. Both the interior minister and the prison minister
resign and the Ombudsman, known for his criticism of the prison service, becomes
a new prison minister. A number of prison chiefs are arrested and Saakashvili is
allowed to shut down all prison staff throughout the country and so far replace
them with police. The government is accusing the opposition of having staged the
film for political reasons with the help of prison chiefs. A prisoner with close
ties to opposition leader Bidzina Ivanishvili is appointed as the author.
However, the opposition claims that the abuse shows how the government has gone
too far in its eagerness to reduce crime.
EU ministers call for electoral preparation
Foreign ministers from five EU countries announce that they will follow the
preparations for the parliamentary elections on the spot. Their presence should
also be seen as supporting reforms that could lead to Georgia's "Euro-Atlantic
integration".
August
Border battles at Dagestan
In fighting near the border with the Russian Republic Dagestan, three
Georgian soldiers are said to have been killed and eleven suspected Islamists.
The Islamists are said to have crossed the border and, for unknown reasons,
taken ten civilians as hostages. At least two of the killed assailants are later
identified as Georgians.
Economic punishment risks stifling the opposition
The opposition alliance Georgian Dream claims that the government has frozen
all six member parties' bank accounts and transferred more than the equivalent
of $ 60,000 to the state budget. Reporters for the Parliamentary Assembly of the
Council of Europe say that the authorities' actions undermine the opposition's
ability to run campaigns before the election.
More fine for oppositionists
Ivanishvili is again fined for suspected illegal party financing. He is
expected to pay the equivalent of $ 12.3 million for withdrawing 2.5 million
from his accounts. Former football professional Kacha Kaladze, who is to run for
parliament for Georgian dream, is sentenced to fined $ 10.3 million for
withdrawing $ 2 million without giving an account of how the money would be
spent.
July
Many millions of fines to help disaster victims
Bidzina Ivanishvili announces that he has paid a fine of $ 48 million for
illegal party financing. He had initially refused to pay, but now says that in
this way he wants to contribute to the state's work to help the victims of
flooding in eastern Georgia.
June
The opposition leader is sentenced to many millions of fines
Opposition leader Bidzina Ivanishvili is ordered by a court to fine the
equivalent of just over US $ 90 million for illegal party financing. The amount
is subsequently reduced to about $ 45 million.
New Prime Minister will handle unemployment
Vano Merabishvili is appointed prime minister. His most important task,
according to the president, is to push down high unemployment from about 16
percent. During his time as Minister of the Interior since 2004, Merabishvili
has received international acclaim for reforming the police force and fighting
corruption, but he has also been criticized by the police for their staunch
intervention against hostile demonstrations.
April
New parties form an alliance with others
Georgian dream - Democratic Georgia forms an alliance with several other
mid-right parties to challenge the government in this fall's parliamentary
elections.
New movement becomes party
Georgian Dream is formally transformed into a political party called Georgian
Dream - Democratic Georgia. As Ivanishvili lacks Georgian citizenship, lawyer
Manana Kobachidze is appointed provisional chairman. Several renowned Georgians
join the party, including the great master of chess Zurab Azmaiparajvili and
football star Kacha Kaladze.
March
The country's richest falls for illegal party financing
Two companies owned by opposition politician Bidzina Ivanishvili (see
December 2011) are sentenced to fines equivalent to approximately US $ 2 billion
for violating a law that prohibits commercial companies from funding political
parties. Shortly thereafter, Ivanishvili himself is fined $ 1.65 million for
illegally funding his own political movement Georgian dream.
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