Newsletter Issue 41 | July – August 2021

Return to growth path after crisis year

After last year’s economic downturn, Georgia is returning to the growth path. The economy is expected to grow by 3.5% this year, mainly driven by consumer spending.

The lari has stabilised at around 3.30 GEL/USD after high volatility and a 14% depreciation against the US dollar last year. The National Bank (NBG) continues to intervene in the foreign exchange market and has raised its policy rate to 9.5% to prevent rising inflation expectations.


Economic Monitor Issue 14 | June 2021


  • Moderate GDP recovery of 3.5% in 2021, after drop by 6.2% in 2020
  • Outlook for 2021 subdued due to lockdown in Q1-2021 and limited prospects for tourism
  • Current account deficit over 10% of GDP in 2020/2021, due to weak tourism revenues
  • Lari depreciated by 14% in 2020, but relatively stable around GEL/USD 3.30 in 2021
  • Inflation on the rise on back of Lari depreciation (pass-through) and higher commodity prices
  • Reaction by NBG: policy rate up by 1.5 pp in 2021; current rate: 9.5%
  • Remittances continue positive trend from second half of 2020; stabilising factor
  • Government continues to provide sizeable COVID-19 fiscal stimulus (2.3% of GDP in 2021)
  • Successful recent placement of USD 500 m Eurobond (5-year maturity, yield: 2.875%)
  • IMF programme successfully completed, new programme still in discussion

Newsletter Issue 40 | May – June 2021

Current German-Georgian economic relations

Since 2014, German-Georgian economic relations operate in the context of the EU-Georgia free trade agreement (“DCFTA”). The positive momentum following the conclusion of the DCFTA was interrupted by the pandemic. In particular, exports of goods to Georgia fell by 22%. The services balance was strongly affected by the slump in tourism. German FDI increased by 7% in 2020 despite the pandemic. Attracting FDI remains a key issue to realize the potential in sectors such as agriculture and diversify the economy. Cluster development is also important in this context.


Newsletter Issue 39 | March – April 2021

Georgia enacts modern insolvency law

On 1 April 2021, a new and modern insolvency law will come into force in Georgia, namely the law “On Rehabilitation and Collective Satisfaction of Creditors”, which was adopted on 18 September 2020. This ends a long reform debate. The law brings a fundamental change in philosophy from the liquidation of the debtor company and the realisation of the insolvency estate to insolvency proceedings focused on the rehabilitation of the debtor and the preservation of jobs. The German Economic Team has supported the reform process for many years.


Newsletter Issue 38 | January – February 2021

Shock to tourism sector drives recession

Real GDP dropped by 5.1% in 2020, compared to a forecast of +4.3% at the start of the year, driven by a decline in exports and investment. Services exports dropped by more than 60% as international tourism came to a halt and the crucial associated revenues collapsed. This drove the current account deficit to 9.8% of GDP. Against the backdrop of tax revenue losses and anticyclical spending, the public deficit stood at 9.0% of GDP. This was partially the result of a sizeable fiscal stimulus package. Together, these result in high twin deficits. The projected reduction of these is important for future economic stability. The NBG’s policy rate was cut to 8.0%. However, the role of traditional monetary instruments is limited by their adverse effects on the exchange rate and inflation, the high level of dollarization and the fiscal stimulus. The pandemic underlined the high reliance of the economy on services, especially tourism. A more diversified economy is key for improved shock resilience in the future.


Economic Monitor Issue 13 | January 2021


  • Strong drop in GDP (-5.1%) in 2020
  • Before the crisis, GDP 2020 was forecast at 4.3%; economy hit hard by pandemic
  • Main drivers: lower exports of services and decline in investments
  • Key sector: tourism; drop in international visitors by 80%
  • Recovery of GDP by 4.3% forecast for 2021, lower rate than before the crisis
  • Lari depreciated by 13% in 2020 against backdrop of uncertainty and lower exports
  • NBG reacted by sizeable FX interventions; policy rate cut by 1 pp to 8%
  • Remittances increased by 8.8% yoy, much stronger than initially anticipated
  • Strong anticyclical response by the government to the crisis
  • Twin deficits: current account deficit at 9.8%, public deficit of 9.0% of GDP
  • Augmented IMF programme crucial for overcoming the crisis

Newsletter Issue 37 | November – December 2020

The economic programme of the re-elected government

The incoming Georgian Dream government has set out an ambitious programme of economic reform for the next four years. Economically, at least, the course continues to run westward, towards European integration. The government says it will continue to put macroeconomic stability first, while also seeking to increase employment and reduce poverty. Much will hinge on the post-pandemic recovery and the quality of implementation.


Newsletter Issue 36 | September – October 2020

Private pension system: resilient in spite of the recession

With the establishment of a privately funded pension system in 2019 Georgia established a second pillar in its pension system alongside the existing basic pension. This was a step owards diversifying sources of retirement income, and boosting institutional investment in the local capital market. Steady participation rates and investment performance suggest the new system can be resilient in the face of the ongoing recession and spike in unemployment. The immediate challenge will be to specify the investment policy and diversify the asset allocation, and to widen the appeal of the system. As regards the asset allocation, the issuance of inflation-linked bonds by the government would be of interest for the pension agency.


Newsletter Issue 35 | July – August 2020

Income distribution and poverty reduction in Georgia

In a recent study, the German Economic Team analyses recent developments in income distribution and poverty reduction in Georgia between 2010 and 2018, looking at trends within Georgia and putting them in an international context. Due to limited data availability, this study does not relate to the most recent distributional policies of the government and the impact of the COVID-19 pandemic.


Policy Paper 01/2020

Income distribution and poverty reduction in Georgia – A comparative analysis

This paper analyses income distribution and poverty reduction in Georgia in the period 2010 to 2017/2018. As we have no data for 2019, our findings do not relate to the most recent distributional policies of the Georgian government. Our results suggest that while Georgia has substantially reduced poverty and income inequality, continuous monitoring of the situation would be helpful.


Newsletter Issue 34 | May – June 2020

Georgia’s economic situation in light of COVID-19

Georgia will be severely hit by the COVID-19 pandemic. While economic fundamentals were good going prior to the crisis, forecasts now show a strong deterioration. Most visibly, real GDP growth is expected to change its sign, from a previous forecast of +4.3% to -4.0%.


Economic Monitor Issue 12 | June 2020


  • GDP to drop by 4.0% in 2020; pre-COVID forecast: +4.3%
  • Consumption to drop heavily, also due to much lower remittances (Apr: -42.3%)
  • Exports to contract by 24%; but effect exaggerated due to re-exports of cars and copper
  • Tourists revenues strongly affected; perspective for Jul/Aug still not clear
  • Current account deficit to reach 11.3% of GDP; pre-COVID forecast: 5.3%
  • Exchange rate at ca. 3.0 GEL/USD; sizeable depreciation in March followed by appreciation
  • NBG’s policy rate at 8.5%; limited room for reduction due to higher-than-target inflation risks
  • Government reacted to crisis with strong anticyclical fiscal measures
  • As a result, budget deficit will amount to 8.5% of GDP in 2020; pre-COVID plan: 2.4%
  • IMF programme augmented by USD 325 m, incl. USD 200 m for budget support

Newsletter Issue 33 | March – April 2020

Agro-exports to the EU: volumes, transport and logistics

Production volumes, as well as barriers in transport and logistics, play a key role in constraining agro-food exports from Georgia to the European Union. These challenges can be addressed by focusing on increasing exports through foreign direct investment and by accelerating exports of existing producers; by providing critical logistics infrastructure, including an airport cargo terminal in Kutaisi; by stimulating domestic demand for quality logistics; and by bundling interests and closing information gaps.


Newsletter Issue 32 | January – February 2020

Strong economic growth despite Russian sanctions

In spite of the Russian sanctions, Georgia’s economic growth was high reaching 5.2% in 2019. The successful absorption of this external shock demonstrates the strong resilience of the Georgian economy, which will grow by more than 4% also in 2020.


Economic Monitor Issue 11 | January 2020


  • Agro-food exports: The role of transport and logistics sector
  • DCFTA: Sectoral analysis reveals sizeable DCFTA effect on EU exports to Georgia
  • Banking sector: Georgian banking sector on a more stable footing
  • Capital markets: Georgian capital markets remain underdeveloped

Newsletter Issue 31 | November – December 2019

Georgia’s financial system on a more stable footing

Over the past year excessively rapid growth of household lending has been successfully reined in, and aggressive lending practices of microfinance institutions have been banned. The high level of dollarisation and excessive debt of households remain vulnerabilities of the financial system and constrain monetary and exchange rate policy. The National Bank has made good progress in developing a regulatory framework for capital markets. The pensions fund became operational in 2019 and may support liquidity in local markets.


Policy Briefing 07/2019

Export opportunities for Georgia generated by the membership in the PEM Convention

Part 1: opportunities for intensified exports of intermediate products


Newsletter Issue 30 | September – October 2019

Startups in Tbilisi: what is needed to accelerate their development?

In recent years, Tbilisi has begun to develop a startup sector. There now are more than 100 small companies, working to develop scalable solutions for problems in Georgia and beyond. Many of these startups are supported by the government through a targeted programme. Several startups have international ambitions, and some founders have gone to highly regarded incubator programmes in Europe or the United States.


Newsletter Issue 29 | Juli – August 2019

Georgia’s macroeconomic situation in light of Russian sanctions

On 21 June, Russia announced a ban of direct flights to/from Georgia. The ban will not only have a strong impact on the tourist industry, but will also affect the macroeconomic situation, given the importance of tourism for the Georgian economy.
The estimated impact of Russian sanctions on GDP amounts to 1 percentage point. As a result, we expect a slowdown in real GDP growth from 4.7% in 2018 to 3.6% in 2019. Expectedly, the Georgian Lari has come under pressure: since 21 June, the Lari depreciated by about 4.5% against the US dollar.


Newsletter Issue 28 | May – June 2019

The effect of the DCFTA on Georgian exports to the EU

Georgia and the EU established a deep and comprehensive free trade area (DCFTA), which came into force in 2014. In a recent comparative study, which also includes Ukraine and Moldova, we look at the effect of the DCFTA on Georgian exports to the EU.
Between 2013 and 2018, exports to the EU – as defined in our study – increased by a rather moderate 9% in US dollar terms. However, in the same period prices for key Georgian export products declined heavily. In real terms, i.e. using constant prices of 2013, Georgian exports to the EU increased by 115%. Having said that, the EU was not able to increase its share as an export destination for Georgian products: the share remained flat at 16%. All in all, we conclude that the DCFTA had a positive, but moderate effect on Georgian exports to the EU.


Newsletter Issue 27 | March – April 2019

Reduction of Georgia’s current account deficit: a new trend?

Traditionally, Georgia has a high current account deficit, which averaged 13% of GDP between 2007 and 2016. This has caused some concern, as it makes the country vulnerable to external shocks. However, in the last two years, Georgia’s current account deficit has been declining, standing at “only” 7.7% of GDP in 2018.
This positive development has come mostly on the back of an increase in exports of services, which is the result of a booming tourism sector. Moreover, remittances have been strong, reaching record Levels of about USD 1.6 bn in 2018.


Newsletter Issue 26 | January – February 2019

Export potential of Georgian agro-food products in the EU market

With 29%, agro-food products make up for a significant share of Georgian exports. Despite having a free trade agreement with the EU, however, Georgian agro-food exports to the EU underperform. About 2/3 of all agro-food exports go to the CIS region. In terms of dynamics, exports to the CIS surged by 43% in 2018, whereas exports to the EU market only increased by 14%.


Technical Note 02/2019

Export potential of Georgia’s agro-food sector on other non-CIS markets: top-10 destinations for each of selected top-20 products


Technical Note 01/2019

Export potential of Georgia’s agro-food sector on the EU market: top-10 destinations for each of selected top-20 products


Economic Monitor Issue 9 | January 2019


  • Presidential elections. New President has been elected
  • Banking. Measures to curb household debt
  • Turkey. So far only moderate effect of depreciation of Turkish Lira on Georgia
  • Pension reform. Start on 1 January 2019

Newsletter Issue No. 25 | November – December 2018

Slowdown of economic growth

The overall macroeconomic situation in Georgia re-mains stable. Economic growth amounted to 5.4% in the first half of 2018. However, a slowdown took place in the second half of the year, which will con-tinue in 2019. As a result, Georgia will grow at a moderate rate of 4.6% in 2019.


Newsletter Issue No. 24 | September – October 2018

Turkish Lira depreciation: moderate effect on Georgia

From January to August 2018, the Turkish Lira depre-ciated by 42% against the Georgian Lari, raising con-cerns about the ability of the Georgian economy to withstand the pressure, given extensive economic links between the countries.


Policy Briefing 06/2018

Economic impact of Turkish Lira depreciation on Georgia


  • Large nominal TRY depreciation vs. GEL (42%)
  • Real TRY/GEL depreciation is only 20%; thus: sizeable, but not so large
  • Impact so far: less GEO exports of consumer & capital goods; more imports from TUR; both in line with the theory
  • But: higher GEO exports of raw materials and intermediary goods to TUR; reason: global value chain effect
  • Estimated impact in the future: moderate impact on aggregate trade in goods, but strong sectoral impact on textile exports (esp. T-Shirts)
  • Services, remittances: moderate impact expected
  • FDI, banking: little impact expected
  • However: impact would change in case of higher depreciation of TRY and/or recession in TUR
  • Thus: need to monitor the situation

Newsletter Issue No. 23 | July – August 2018

Economic relevance of crypto-mining in Georgia

Georgia is one of the leading producers (“miners”) of cryptocurrencies worldwide. Despite this fact, little is known about the relevance of crypto-mining for the Georgian economy. Official statistics fail to properly record the mining activity, which to a large extent takes place in free industrial zones.


Policy Study 02/2018

Potential in the development of non-bank finance: experience from EU countries in central and south eastern Europe


Newsletter Issue No. 22 | May – June 2018

Georgia in mid-2018: positive economic trend continues

In 2017, the Georgian economy developed well. By mid-2018 we observe a continuation of this trend. GDP increased by 5.0% in 2017 and in the period of January-April 2018 growth even accelerated to 5.5%. Economic growth is broad based – whereas agricul-ture is the only exception with a decline in 2017.


Economic Monitor Issue 8 | June 2018


  • Mining of cryptocurrencies. Own estimation of contribution to GDP
  • Mid-term fiscal plan. Higher public investment combined with a lower budget deficit
  • Banking sector. Stability and concentration
  • De-dollarisation. Partial success in 2017

Newsletter Issue No. 21 | March – April 2018

Banking sector: good performance, but challenges remain

Georgia’s banking sector has served well the needs of a growing economy. The ratio of banking sector assets to GDP has steadily grown and the ratio of credit to the real sector is high in comparison to other countries in the region. The sector stands out for the concentration of assets in the three largest banks which may give rise to concerns about competition in the sector and non-banking activities by the owners of these banks. The two largest banks are listed on the London Stock Exchange and therefore comply with high governance standards. Unlike in many other countries in the emerging Europe region, the Georgian banking sector has not experienced any major instability in recent years. Bank liquidity and capital coverage are very high and should provide ample buffers to withstand future shocks. The authorities have rightly developed a strategy of dedollarisation, based on a monetary regime that targets inflation. There is a need to expand the capital markets which could offer funding at longer maturities in the local currency.


Newsletter Issue No. 20 | January – February 2018

Georgian economy outperformed expectations in 2017

The Georgian economy develops positively. GDP grew by 4.3% in 2017 and is expected to continue with similar speed in 2018. Economic growth occurred on a broad base: It has been supported by consumption, investment and exports.


Economic Monitor Issue 7 | January 2018


  • Inventory write-offs. State should allow enterprises to write off actual losses; verification by plausibility checks founded on databases
  • Remittances. Increase by 20% in Jan-Sep 2017 supports private consumption
  • Doing Business Ranking. Improvement from rank 16 to rank 9
  • Capital market development in the context of the DCFTA. Possibility for larger enterprises to mobilise capital
  • Introduction of capital-funded pensions. Successful introduction of capital-based pensions only in case of simultaneous reform of the 1. pension pillar

Policy Briefing 06/2017

Approximation of capital markets legislation to EU standards: Commitments under the DCFTA and priorities in Georgia’s capital market strategy


Policy Paper 03/2017

Economic impact of new energy performance standards for buildings

The Energy Performance of Buildings Directive 2010/31/EU (EPBD) and the Energy Efficiency Directive 2012/27/EU (EED) will require a significant adjustment of Georgia’s energy efficiency policies with a profound effect on the building sector. Among the numerous measures which both directives contain, the requirement to set new legal minimum energy efficiency standards for newly constructed buildings and also buildings undergoing major refurbishment is the single measure with the largest economic impact.


Policy Paper 02/2017

The creative sector in Georgia: Situation, potential and policy issues

Georgia has a rich cultural tradition as well as an affinity for unique designs. Can this creativity be an economic asset? This can in principle be assessed by using the standard “creative industries” approach, which measures several industries in the creative sector. Due to data limitations, we develop and use a slightly simplified method based on the international approach for Georgia.


Economic Monitor Issue No. 6 | June 2017


  • New IMF programme signed. Important stability signal for investors
  • GET Georgia recommends economic policy priorities. Comprehensive package of measures by all relevant government departments is needed
  • Unlocking the export potential of Georgian agriculture. Land consolidation and productive alliances can help exploit the export potential
  • DCFTA implementation in Georgia. Implementation mostly on track

Policy Briefing 02/2017

Unlocking the export potential of Georgian agriculture

Aim of this Policy Briefing: Recommendations for boosting agri-food exports

Structure of the Policy Briefing:

  • Analysis of current agri-food exports
  • Identification of potential
  • Constraints on current exports
  • Options for producers
  • Policy recommendations

Policy Paper 01/2017

Unlocking the export potential of Georgian agriculture

Georgia’s agri-food export is concentrated in few products and few undemanding markets, making it highly vulnerable to shocks on a small number of commodity and geographical markets. At the same time, the diversity of climatic conditions and ample water resources create significant growth and diversification potential for Georgian agriculture. Georgian conditions appear especially suitable for the production and export of high-value niche products as the land mass is small and fragmented, both due to topographic conditions and present ownership patterns.


Policy Briefing 01/2017

Developing creative industries: Approaches and international experience


  1. Contribution of culture and creativity to the economy
  2. Definitions: from creative industries to creative economy
  3. Why develop the creative industries and creative economy?
  4. Supporting creative industries and creative economies
  5. International experience
  6. Towards a creative economy approach for Georgia