Georgia: Way Forward or Backwards ?

Jul 14, 2023

Georgia is a beautiful and hospitable country. And it’s not surprising that Russia wants to keep Georgia under control and keep its Southern neighbor in its economic and political orbit.

In many ways, Russia’s success is due to the special attitude of the Georgian government towards Russians:

– the absence of entry requirements
– no restrictions on work or business
– a large number of direct flights from Russian cities to the airports of Tbilisi, Batumi and Kutaisi

In Q1 2023, the growth amounted to

– 7.2% for the economy (after 10.5% in 2022)

– 21% for foreign trade

– 24% for export

– 33% increase in the number of visitors to 3 international airports

– 110% in international arrivals – more than 1.2 million travelers, of which 25% from Russia, 18% – Turkey and 15% – Armenia

According to TBC, there were about 115’000 war-affected migrants in 2022. Most migrants are expected to stay, fueling growth in domestic consumption and playing a key role in economic growth in 2023.

According to Prime Minister Garibashvili, the economy has grown by an impressive ₾30 billion / ~$12 billion in total in three years; GDP per capita jumped from $4’500 to $8’200, while the current account deficit halved to a historic low of 4.1%.

The above economic success story, however, has a number of political implications and potential risks.

Most importantly, Georgia has deviated from the previously set course for the EU candidacy. Leaving aside economic considerations, political preferences put Georgia’s European integration into serious question.

As a result of the chosen policy, international financial institutions and Western multinationals may choose to avoid any significant investment in the country.

Given that Russia’s war in Ukraine is also a war for resources, Georgia faces a number of geopolitical risks, including direct or indirect Western sanctions. Even if this risk is small, it can become a serious obstacle to receiving Western investments.

There is little doubt that Russia is playing a power game and, for obvious reasons, Georgians are ambivalent about this. Digging deeper, the peculiarities of the local voting system allow to control parliament with only 30% of the votes. The younger generation is clearly unhappy with the development and lack of opportunities, and many young Georgians leave the country for Europe and the US, and young, apparently Russians, take their place.