European Commission publishes Spring 2025 economic forecast, projecting robust growth for Georgia

The European Commission on Monday published its Spring 2025 Economic Forecast, which stated that “following another year of very strong growth, Georgia’s economic activity is projected to decelerate but remain robust at 5-6 percent in 2025 and 2026, partly reflecting positive spillovers from Russia’s war of aggression on Ukraine”.

Growth is expected to continue to be driven by domestic demand, especially by private and government consumption. Inflation is set to pick up temporarily due to the pass-through from wage increases and demand pressures, before returning close to the central bank’s target. The current account deficit is projected to widen, driven by the increasing trade deficit.

The general government deficit is expected to remain contained, and the public debt-to-GDP ratio is set to continue declining. Economic growth was very strong in 2024, at 9.4 percent.

Private and government consumption were the most important growth factors, stimulated by strong wage increases, employment growth and fast-growing consumer loans. Investment picked up strongly in the same period, supported by higher business lending, good financial results of enterprises and strong public investment. The contributions of net exports of goods and services and of inventories to growth were negative. On the supply side, the value added increased most in ICT, construction, tourism, transport and other services.

Georgia continues to benefit from the reallocation of certain services and trade routes away from Russia following its full-scale war of aggression against Ukraine, reflecting in part a sizable inward migration from Russia.

Growth is projected to decelerate in 2025 and 2026 but to remain robust at 5-6 percent.

Private consumption is set to remain the main growth driving factor, supported by strong consumer lending and continued, albeit slower, increases in real wages. Investment is also projected to grow, driven by dynamic business loans and strong public investment, although business confidence has deteriorated markedly in the first quarter of 2025 reflecting the political turmoil in the country. The contribution of net exports to growth is set to remain negative, although lower than in 2024, as the demand for goods imports triggered by strong consumption and investment is expected to be stronger than the positive contribution from growing tourism and other services exports.