Economy of Georgia (country) - Recent Macroeconomic Performance

Recent Macroeconomic Performance

Over the last few years Georgian economy has been one of the fast in the FSU. Since 2003 Rose Revolution, new Government of Georgia implemented broad and comprehensive reforms, that touched every aspect of the country’s life. Economic reforms were addressed to liberalization of economy and provision of sustainable economic growth, based on the private sector development. Establishment of an attractive business environment leaded to significant inflow of Foreign Direct Investment in the country, facilitating high economic growth rates.

Based on the economic reforms, Georgian economy has been diversified showing an upward tendency with average 10% of annual GDP real growth in 2004-2007 and reached the highest level – 12.3 percent in 2007. In overall, during 2004-2007 the economy of Georgia expanded by 35%.

Due to reforms and liberalization of economy policy Georgia shows exceptional resilience to external shocks – Russian invasion in 2008 and global financial crisis. Despite this, in 2008 Georgia economy grew by 2.3%. After a slight slowdown of economy in 2009 (-3.8%) country recovered shortly with 6.3% GDP real growth 2010. In 2011 GDP real growth reached 7.0%. Unemployment rate for 2010 constituted 16.3% and it was decreased from 16.9% in 2009.

In 2011 the annual inflation rate in Georgia equaled 2.0 percent. It has been decreased significantly after 11.2% in 2010. Growth of inflation rate was the result of increasing food prices in the world and essential share of the inflation fluctuations came on variability of food prices, as far as the share of food is relatively high in consumer basket of Georgia.

In 2011, IMF estimated current account balance of Georgia was -1.489 BN USD. Georgia has moderate deficits among the European and Transcaucasian Post-Soviet states:

Deficits in current account have been more than offset by strong foreign capital inflows, allowing the Georgian currency to appreciate.

The government has managed to preserve financial stability thanks to the considerable aid provided by the US and international institutions. EBRD analysts believe that substantial international financial support and remittances from workers living abroad will cover the current account deficit in the medium term. IMF positively evaluated government’s economic policy.