World Bank forecast: Georgia’s economy to grow by 5% in 2026

The World Bank’s latest economic review highlighted that Georgia’s economy was projected to grow by 5% in 2026, significantly outpacing Moldova (1.9%) and Ukraine (1.2%).

The report notes a broader slowdown across developing countries in Europe and Central Asia (ECA), driven by geopolitical tensions, global trade fragmentation, and the ongoing impact of conflicts in different regions.

The report projects that overall economic growth in the ECA region will decline to 2.1% in 2026.

Growth in Russia is expected to slow to 0.8%, while other parts of the region may see expansion of around 2.9%, largely due to reduced consumer activity and rising energy costs.

Despite these challenges, Georgia’s economy is forecast to grow by 5%, supported by strong private consumption, construction activity, and re-exports.

Antonella Bassani, World Bank vice president for the Europe and Central Asia region, noted that the region’s resilience continued to be tested.

“The region’s resilience continues to be tested, given several countries’ dependence on imports of natural gas, oil, and fertilisers. In many countries, responding to the impact of the crisis will require a focus on targeted measures to protect the most vulnerable groups. Despite the challenges, implementing sectoral reforms to support firm growth and job creation will help mitigate the impact of the crisis and enhance economic resilience and dynamism”, she said.

The report also notes that Central Asia’s growth is expected to slow to 4.9% in 2026-2027, while Central Europe is projected to grow by around 2.4% this year.

The Western Balkans are expected to maintain an average growth rate of 3.1%, supported by infrastructure investments and services exports.

In Ukraine, economic growth is expected to slow to 1.2% this year due to the ongoing war, rising energy costs, and fiscal pressures.

The report also noted that a prolonged and intense conflict in the Middle East remained a significant risk factor, with the potential to disrupt global supplies of energy carriers and fertilisers, which could lead to a substantial increase in energy and food prices and a sharp downturn in the region’s economies.

In many countries of Europe and Central Asia, the slowdown in productivity growth over the past decade has prompted some policymakers to supplement broad reforms with industrial policies aimed at state interventions to support specific sectors, measures, or firms.

A special analysis in the report emphasises how countries can use industrial policy to accelerate economic growth and job creation, provided the region’s approach benefits from well-defined goals and measures that strengthen future competitiveness rather than deepening existing economic vulnerabilities.

For example, approximately two-thirds of all industrial policy interventions are currently directed toward agriculture and food production, while only 10% are focused on high-tech or industrial goods.

Ivailo Izvorski, World Bank Chief Economist for the Europe and Central Asia region, highlighted the ambitious policy reforms that modernise the entrepreneurial environment.

“To achieve significant increases in productivity and job creation, countries in Europe and Central Asia can prioritise ambitious policy reforms that modernise the entrepreneurial environment, support business development, and improve the quality of education. Targeted use of state resources, such as industrial parks or special economic zones, can help address identified market failures. However, industrial policy should be used moderately and only temporarily”, Izvorski said.

The report recommends that industrial policy should encourage new and dynamic private sector firms and ideas, rather than supporting existing market players such as state-owned enterprises, and that it should strengthen - and not hinder - competition.