Brief Overview Of Georgia’s Economy

Brief overview of Georgia’s Economy

Georgia is small county, which has opportunity to build strong, independent and successful

economy after collapse of the Soviet Union, but as we know its annual economy growth is not so

high. To see where are main problems discuss several indexes, for example real GDP (PPP) per

capital which is one of the useful way to measure of overall individual well-being. This index

shows how much currency will be needed to buy the same quantity of G&S in different countries

and is a more accurate reflection of actual living standard. To assess standard of living in Georgia

in last 10 years look at the first statistic of how the GDP per capital (PPP) increases.

From 2008 GDP per capital (PPP) increases year to year. It is good because standard of living

becomes better and better. In 2018 GDP Per Capita PPP was more than 14 000 (doubled after

2009). But the annual real GDP per capita growth’s percentage is not constantly upward. In 2009

GDP per capita increased by 9%, while in the following years its range was between 3% and 5%.

Here we see Germany, Turkey, Azerbaijan and

Georgian’s GDP per capital (PPP). Measured

living standard in Germany (53,660) and

Turkey (28,299) is higher than in Georgia

(14,248) and in Azerbaijan (14,197) is the

lowest. Georgia was in 107th place with US$

GDP per capita, PPP (current international $) – Georgia, Germany,

Azerbaijan, Turkey (worldbank.org)

worldbank.org

9,209 GDP per capita (PPP) in 2014, it is drastically behind rich countries. Georgian Lari depreciate

all the time and it hinders increasing GDP (PPP) and well-being. However, most of products are

imported in Georgia and their prices are determined based on exchange rate from the beginning.

I think we cannot compere imported goods even because mostly we have not tariffs on that

products, it is good – we buy products in the prices of “world”. And about local products, part of

them are basically cheaper, for example wine, water (a 0.5L bottle of water costs 60 Tetri while

in EU it is 1 euro or more which is about 3 Lari). After all this index has upward curve because

Georgia has outward-oriented policies and interact with other countries which help us to

develop, but the rate is slow, and it did not give us high standards in short-run.

Base on GDP per capita (PPP) Georgia has low standard of living, we are still so far from

Europeans’ standard. To solve

this problem, we need to

increase your production and

productivity, import less

products (which will cause

fall in exchange rate) and

orient to boost local goods and

services.

GDP per capita, PPP (current international $) – Georgia (worldbank.org)

Economic growth is measured by the percentage rate of increase in the real gross domestic

product (GDP). Everyone matters real GDP because it is a more useful gauge of the change in

production levels from one period to another. Between 2010 and 2019, Georgia’s GDP per

capita grew was annual rate of 4.8 percent.

Georgia’s economic growth

fluctuates between 8% to 3%

during the last 10 years. It is

very bed results especially

latest years’ rates because

Georgia is a poor country and

any small growth in capital had

to increase our economic a lot

(catch-up effect). With this

small percent in our economy growth Georgia will need too many years to reach already

developed countries standards. A catch-up effect was happening from 2008 to2010, in 2008

stared a war and economic crisis, in 2009 growth rate reached -3.7%, after a war, economy

started increasing by 9%. However, we cannot compare countries with just size of rate, for

example, Germany’s annual growth is between 2-3% but it obviously does not mean that

Georgia’s growth is better; developed Germany just uses its max possibility to produce G&S in

short run which equals long-run output as well.

In the GDP of Georgia (which was 17.7 billion in 2019) the biggest part always takes

consumption, then investment, government purchases and NX is always negative. I think it is

not good when country growth bases on private spending, because it means people save and

invest less, in poor countries like Georgia it hinders increasing standard of living and physical

capital which is all stock of equipment and structures that are used to produce G&S, so we

need more growth rate in investment than consumption.

www.geostat.ge

Here we see that investment is increasing. 2014

investments growth was about 10%. I think

foreign investment will increase more next

years because Georgian Lari depreciates all the

time and it seems more attractive and cheaper

for foreigners, for example, salaries (cost of

firms) in dollars will be lower in Georgia than

in other countries., also after Covit-19 many

foreign companies which were completely

depended on China factories faced a problem

when China closed and their production has

stopped. Now they are motivated to find another cheap country to move part of their factories

in other counties, so it is good opportunity for Georgia to invite these investors and increase