Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
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
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
