One of the freest economies of the world, Georgia has been a story of radical reforms, stable GDP growth and awe-inspiring foreign direct investments.
A remarkable recognition of modern Georgia’s economic progress came its way on 20 January 2010, when the Heritage Foundation rated it the 26th freest economy in the world in its ‘2010 Index of Economic Freedom’. This signified a gain of six places over 2009. Georgia’s economic freedom score was 70.4 out of 100, 0.6 point higher than last year, and higher than the world average.
According to the Heritage Foundation: “With impressive progress toward greater economic freedom, Georgia for the first time has achieved “mostly free” status. This is particularly justified by high ratings in business freedom, trade freedom, fiscal freedom, labor freedom and freedom from corruption. With its strong commitment to economic reform, Georgia has revitalised its tradition of entrepreneurship.”
Prime Minister Nika Gilauri reacted to this achievement in the following words: “Moving up from “partly free” status to “mostly free” category means that those economic reforms that Georgia has and continues to implement have been rewarded… We [now look forward to] the world economy restoring positive growth and investors returning to their dynamic investment activities.”
Georgia’s GDP estimate for 2009 was USD20.75bn. Of this, by sector, agriculture constitutes about 12.1%, industry 25.9%, while services constitute about 62%.
The country’s main outputs include steel, aircraft, machine tools, electrical appliances, mining (manganese and copper), chemicals, wood products and wine.
On 2009 estimates, Georgia’s exports stood at USD1.766bn. The major export goods include scrap metal, wine, mineral water, ores, vehicles, fruits and nuts. In the same year, Georgia’s imports amounted to USD4.477bn. The major import goods for the nation include fuels, vehicles, machinery and parts, grain and other foods, and pharmaceuticals.
Tourism is a leading contributor to the state exchequer with an annual windfall of more than USD34bn and employment numbers that reach nearly a quarter-million people.
Large inflows of foreign direct investment (FDI) have been a driving factor for the rapid economic growth in Georgia since 2003. In 2007 alone, the economy of Georgia attracted over USD2bn in FDI, bringing the total FDI stock to 51.1% of the GDP—a ratio second only to Estonia in the former Soviet Union region.
The government expects Georgia’s GDP growth to meet the 4-5% forecast for 2010, based on several indicators. For instance, in January 2010, the value added tax (VAT) revenue, which is normally highly sensitive to GDP growth, grew by 12% y-o-y, while the overall tax revenue collection was up 5% y-o-y. The turnover figures of the VAT-registered companies showed a positive trend in Q4 09, continuing in January 2010. Q4 turnover in 2009 was up 1.5% y-o-y, suggesting modest economic growth. In December 2009, the y-o-y growth of the turnover accelerated to 2.7%.