EU Report Predicts Steady Growth Despite Political Concerns
By Liza Mchedlidze
Tuesday, May 20, 2025
According to the European Commission's Spring 2025 Economic Forecast, Georgia's economy is expected to grow by a solid 5 to 6 percent in both 2025 and 2026. The report highlights continued momentum from consumer lending, business credit, and public investment, but also points to political instability and geopolitical tensions as major risks to investor and consumer confidence.
According to the report, Georgia's economy expanded by 9.4 percent in 2024. This growth was largely driven by increased household and government consumption, rising wages, growing employment, and a surge in consumer loans. On the production side, growth was concentrated in sectors such as information technology, construction, tourism, and transport. These sectors, the report notes, have benefited from redirected trade and services due to the war in Ukraine and migration from Russia.
The report states that unemployment dropped from 16.4 percent in 2023 to 13.9 percent in 2024, and the trend is expected to continue, though at a slower pace. Real wages rose by 15 percent in 2024, which the report attributes to high-skilled migrants entering the labor force, particularly in IT, as well as local companies responding to labor shortages and rising living costs. Wage growth is projected to moderate, but remain higher than productivity growth.
Although inflation decreased during 2024, the report notes that it climbed again to 3.4 percent in April 2025 and is projected to average 4 percent for the year. The increase is linked to higher wages, slight depreciation of the lari, and statistical base effects. The report forecasts that inflation will ease in the coming years and return to the National Bank's target of 3 percent by 2026.
According to the report, Georgia's current account deficit narrowed to 4.3 percent of GDP in 2024, down from 5.6 percent the year before. Export growth reached 6 percent, mainly driven by demand for metallurgical goods and re-exported vehicles. Imports also increased due to domestic demand for consumer and investment goods. The report anticipates that the trade deficit will widen slightly in the next two years, although a continued rise in tourism is expected to support a surplus in services.
The report says Georgia's general government deficit stood at 2.1 percent of GDP in 2024, remaining below the 2.5 percent target. Increased public sector wages helped boost personal income tax revenues, while higher gambling fees and banking sector taxes also contributed. Government spending rose by 20 percent, driven by salaries and interest payments, while capital investment increased by 10 percent. According to the report, public debt was 36.1 percent of GDP at the end of 2024 and is expected to decline further. The deficit is projected to stay near 2 percent of GDP through 2026, within the country's fiscal rule.
