Georgia is involved in trading with many countries since ancient times, due its location on the Black Sea, and successfully continues trade activities at present time the country is located on the historic Silk Road. Agriculture and tourism is considered important economic sectors in Georgia's modern history, because of the country's climate and topography. Wine making is a very old and important tradition, and currently tourism sector is increasing rapidly in Georgian economy.
During the twentieth century, Georgia's economy belonged to the Soviet model of the planned economy.
Since the fall of the Soviet Union in 1991, Georgia embarked on a major structural reform aimed to make transition to a free market economy. Like other post-Soviet states, Georgia has suffered from a severe economic collapse. The civil war and military conflicts in Tskhinvali Region /South Ossetia and Abkhazia aggravated this situation. Agricultural and industrial production has diminished, and by the year of 1994 the country’s GDP had reduced to a quarter of that of 1989.
The first financial help from the West came in 1995, when the World Bank and International Monetary Fund granted Georgia a credit of 206 million USD and Germany granted 50 million DM.
At present time attracting FDI (foreign direct investment) is among the top priorities of Georgia; and free investment environment, and equality policy adopted towards local and foreign investors make Georgian arena attractive for FDI.
Stable economic development, liberal and free market oriented economic policy, low taxes, low number of licenses and permissions required, considerably facilitated administrative procedures, preferential trade regimes with foreign countries, advantageous geographic location, integrated transport infrastructure, educated, skilled and competitive labor force presents a solid ground for successful business in Georgia.
In 2015, Foreign Direct Investment (FDI) amounted to 1,564,500,000 USD, while the total volume of FDI in 2014 was 1,758,400,000 USD.
By the end of 2015 distribution of FDI in sectors was as follows:
- 3Transports and communications sector, reaching 207 million USD (58.5% in total FDI).
- 3Financial sector - 41.4 million USD (11.7% in total FDI).
- 3Manufacturing - 29.5 million USD (8.3% in total FDI).
- 3Construction – 24.7 million USD (7.0% in total FDI).
- 3Real Estate – 19.6 million USD (5.5% in total FDI).
- 3Hotels and restaurants – 18.2 million USD (5.1% in total FDI).
The main imports from abroad to Georgia are:
- 3Medicaments - worth 260 million USD (15.2% of the total imports).
- 3Petroleum gases and other gaseous - 124 million USD ( 7% of imports).
- 3Cars - 99 million USD (6%of imports).
The main commodities exported by the Georgia are:
- 3Copper ores and concentrates - worth 84 million USD, (19% of total exports).
- 3Cars (re-export) - 38 million (9% of the total exports).
- 3Nuts ( fresh or dried) - 33 million USD (7 % of the total exports)
Business Confidence Index in Georgia
According to report by the International School of Economics (ISET) of Ivane Javakhishvili Tbilisi State University, Business Confidence Index in Georgia had increased to 14 points in Q1, 2016 compared to 11.90 points of Q4, 2015. Business Confidence Index in Georgia was 20.67 points since 2014 until April 2016. It reached its highest level ever in the Q3 of 2014 - 40.40 points. The lowest level of Business Confidence Index in Georgia was 3.60 point in the Q2 of 2015.
Business confidence for Georgia is measured by seven sector-specific indices focusing on: services, retail trade, agriculture, manufacturing industry, financial service construction and other sectors. And the index is calculated as an average of the total: production, sales, trade, competition, stock size, evaluation of the application, operating costs, profit, employment, and sale prices.
Trade Balance of Georgia
In March 2016 deficit of the trade balance of Georgia has reduced by 18.6% compared to previous year, reaching 403.86 million USD. Imports decreased by 16.4% - 565.76 million USD, and exports fell by 9.6% reaching 161.9 million USD.
Georgia’s International position in Investment
According to new data published by the National Bank of Georgia (NBG), Georgia’s International Investment Position (IIP) has dropped on a global scale. A country's IIP is a financial statement setting out the value and composition of that country's external financial assets and liabilities. A positive IIP value indicates a nation is a creditor nation, while a negative value indicates it is a debtor nation, as is such in Georgia’s case. As of December 31, 2015 the country’s net IIP amounted to -$17.9 billion USD. This was 128.6 percent of the country’s Gross Domestic Product (GDP) of last year.
On 1 April of 2016 National Bank of Georgia said: “This figure has deepened by $515.2 million USD and by $499.1 million USD compared to the fourth quarter of 2014 and the previous quarter records consequently. Transactions, price and other changes were negative, while the exchange rate changes were positive during [Q4 of 2015], Meanwhile Georgia’s international assets increased by $190.5 million during the quarter and by $459 million annually. Total assets amounted to $6.9 billion by the 31st of December 2015, Georgia’s liabilities increased by $974.3 million compared to the end of Q4 of 2014 and by $689.6 million compared to the previous quarter's figure. Georgia’s total liabilities reached $24.9 billion USD”.