"Georgia’s economic growth will slow in 2025 and 2026 but remain stable" — European Commission report

European Commission Economic Report on Georgia

Georgia’s economic growth is expected to slow in 2025–2026 but remain at 5–6%, according to the European Commission’s European Economic Forecast report.

The report notes a significant decline in business confidence in the first quarter of 2025, reflecting ongoing political unrest in the country.

Growth will continue to be driven by domestic demand, especially private and public consumption. Inflation is projected to rise temporarily due to wage increases and demand-side pressures before aligning with the central bank’s target.

The budget deficit is expected to close, and the debt-to-GDP ratio will continue to decline.

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Key points from the report:

● Georgia’s economic growth in 2024 was exceptionally strong, reaching 9.4%. The main drivers were private and public consumption, supported by significant wage growth, rising employment, and consumer lending. Investment also surged during the same period, boosted by increased business lending, strong corporate performance, and substantial public investment.

● Georgia continues to benefit from the relocation of certain services and trade routes from Russia following the start of the war in Ukraine, partly due to significant migration from Russia.

● Economic growth is projected to slow in 2025 and 2026, though it will remain stable at 5–6%. Private consumption will remain the key growth driver. Investment is also expected to rise, supported by dynamic business lending and continued public investment, though business confidence dropped sharply in the first quarter of 2025 due to political turbulence in the country.

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● The contribution of net exports to economic growth will remain negative, though smaller than in 2024, as import demand—driven by high consumption and investment—is expected to outweigh the positive impact of growing tourism and service exports.

● There remains a high level of uncertainty related to domestic political developments and ongoing geopolitical tensions in the region, which could negatively affect business and consumer sentiment.

● Thanks to strong economic growth, the unemployment rate dropped significantly—from 16.4% in 2023 to 13.9% in 2024. The decline is expected to continue in 2025 and 2026, albeit at a slower pace.

● Employment grew by 2.5% in 2024, though the employment rate remained relatively low at 47.1%. Preliminary data indicates strong wage growth—15% in real terms in 2024—driven by several factors: the wage premium of skilled Russian migrants (especially in IT), Georgian companies’ willingness to offset rising living costs (notably rising urban rents), labor shortages in some production sectors, and rapidly falling inflation during 2024. Wage growth is expected to slow in the coming years but remain above labor productivity growth.

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