Economy of Georgia

The natural resources of Georgia might be the basis for its potential economic growth. Georgia has always been the country of the fertile and rich lands. The population of East Georgia valleys was engaged in agriculture, combining cultivation of wheat and barley with wine growing, fruit growing, and silkworm breeding. In the middle of the 19th century they started planting such valuable subtropical cultures as teas, citrus fruits, cotton and tobacco. The major branch of Georgian traditional economy is winemaking. It was developed everywhere where grapevine grew. The country grows about 500 varieties of grapes. Wine has always been one of the basic Georgian exports. During Soviet times Georgia exported agricultural and industrial products to other republics of the Union and was a popular tourist destination.

But after gaining the independence in 1991the country experienced deep economic recession. In addition it suffered greatly due to the conflicts in Abkhazia and South Ossetia.

The manufacture volume was reduced to 70%, export – to 90 percent resulting in rapid inflation rate. In 1995 the government took measures aimed at economy salvation forcing down inflation directing all IMF loans to financial stabilization and rearranging the economic structure to comply with the loan terms. Grain and bread prices were liberalized, the agreements on pipelines crossing the territory of Georgia were signed, the laws on commercial banks, land, agrarian and tax reforms were passed. The introduction of the new monetary unit – lari in October 1995 chests and relatively balanced state budget beneficially influenced the economy. In 1995 drastic measures on the bank system regulation were taken. One of the overall objectives of reforming bank and financial business is the re-structuring of the accounting system in accordance with the international standards. In 1996 the regional intrabank bank exchange network was started and the modernization of existing bank exchange electronic system was introduced.

Gross domestic product reached 14% in 1996. Over 30 thousand private enterprises engaged in services, transport, construction and food-processing were opened. The majority of small and some large enterprises along with housing were privatized.

Huge assistance to Georgia was rendered by the countries-donors and international organizations such as the World Bank, the International Association of Development – IAD, the International Fund of Agricultural Development, the UN Food and Agriculture Organization, the European Bank of Reconstruction and Development and many other.

Today the restoration of the country's power grid and the growth of electric power production are under way (Georgia has not only begun to restore old hydroelectric power stations but also built new ones so today Georgia is able to export the produced power) and so is the development of perspective oil deposits in eastern Georgia. New pipelines in Kutaisi, Gori, Kaspi, Rusavi etc. are under construction. Baku-Tbilisi-Dzheikhan pipeline built and financed by the International Financial Corporation will be directed across Georgia.

Georgia is the importer of foodstuffs, energy carriers, cars, machinery and transportation equipment. Georgia exports mineral waters, wines, tea, citrus fruits, pipes, alloys of ferrous and nonferrous metals, and textile products. Besides, it is engaged in re-export of crude oil. The volume of import in 2000 totaled 898 million dollars, export – 372 mln. dollars. The largest import partners are the EU countries, Russia, Turkey, and the USA; export – Russia, Turkey, Azerbaijan and Armenia .

Major industries are food (including tea, tinned goods, wines; tung oil, fragrant essences, mineral waters etc.), light industry, mechanical engineering, chemical and petrochemical industry, oil refining, ferrous metallurgy; extraction of manganese ores, coal, ores of nonferrous metals, barite, etc.

Agriculture: viticulture and pomiculture are the leading industries in eastern Georgia along with cereals production (wheat, corn, barley) and cattle breeding – meat and dairy, sheep, swine and poultry breeding. More than half of the enterprises are located in the cities of Tbilisi, Rustavi (eastern Georgia ) and Kutaisi (western Georgia ).

After the Revolution of Roses which took place in November 2003 in Georgia the new government took drastic measures to re-structure the political system, eradicate corruption, stabilize economy and budget. As a result the year 2004 saw the considerable growth of economy. According to forecasts by 2008 the projected gross domestic product growth rate will average 5 % annually. In this connection the biggest role will be played by tourism and transit trade. The government of Georgia continues to pursue chosen macroeconomic policy attempting to carry out the program of structural reforms for the purpose of creation more favorable conditions for economic growth.