The Asian Development Bank [ADB] has upgraded Georgia`s economic growth forecast from 5% to 5.5%, citing strong performance in the services, information, and communications sectors. The ADB also noted that Georgia is striving to position itself as a regional transport, trade, and logistics hub.

"Growth is projected to continue in 2026 and 2027 but slow further, because of global headwinds. If the conflict in the Middle East is prolonged, and energy prices remain elevated while supply disruptions persist, growth could slow further. Under the early stabilization scenario, finalized on 10 March, growth is forecast to decline to 5.5% in 2026 with slower expansion in Europe and to 5.2% in 2027 as domestic consumption slows with waning contributions from Russian migrants. Eurozone weakness and uncertainty among key trading partners are likely to limit external demand. Growth in industry is projected rising to 2.4% in 2026 with a pickup in construction and to 2.0% in 2027 with steady manufacturing expansion. Growth in services will remain strong but slow to 7.5% in 2026 with continued but slower expansion in transport and storage and in wholesale and retail trade and to 6.8% in 2027 from sustained but moderating growth in information and communication. The contraction in agriculture is projected to ease in 2026 even as sector employment continues to fall, with growth resuming in 2027 at 1.7% as improvements in irrigation and crop systems boost productivity and climate resilience.

On the demand side, expansion in private consumption will slow further. Growth in private consumption is projected to fall to 5.2% in 2026 as credit growth slows, and to 4.8% in 2027 as Russian migrants start to depart and weaker foreign inflows diminish household spending. Investment is projected to grow by 2.5% in 2026 as inventories are rebuilt and public infrastructure spending expands, and by 1.8% in 2027 as increased investment in plant and equipment offsets a moderation in current spending. Net exports are expected to make a small positive contribution to growth, despite a slowdown in service export growth. Georgia’s suspension of the EU accession process and the EU’s calls for course correction may create bottlenecks that weaken export performance and deter investment.

Inflation is projected to ease with lower domestic food prices, but increased global energy prices may add to inflationary pressures. Barring major shocks, inflation is expected to start slowing in the second quarter of 2026 and reach 3.8% for the year. Inflation is projected to slow further to about 3.3% in 2027, reflecting improved labor productivity, absent supply shocks that could lead to cost-push inflation. Broad money growth is expected to moderate to 15.0% in 2026 as credit growth decelerates, with unhedged borrowers facing still tighter limits, and rise to 15.5% in 2027 as credit expands. However, inflation could be higher in the event of sharp currency depreciation, higher oil or transport prices, or a recurrence of supply-chain disruptions from regional conflicts, including in the Middle East.

Fiscal policy will become slightly more expansionary. The budget deficit is projected to widen to 2.0% of GDP in 2026, with accelerating investment spending, and rise further to 2.2% in 2027 amid still higher capital expenditure. Revenues are projected to increase to 27.5% of GDP in 2026 because of strong tax performance and 27.7% in 2027 with efforts to improve tax administration and raise excises. Continued fiscal discipline is expected to keep public debt below 35% of GDP together with declining external debt in both years. Georgia is expected to retain access to international capital markets at favorable terms, though institutional uncertainties may undermine investor confidence and increase the risk of policy slippages.

The current account deficit is expected to widen as export growth slows. Growth in service exports is projected to decline to 6.8% in 2026 with global uncertainties before rising to 7.2% in 2027, benefiting from transportation services and personal travel. Merchandise export growth is projected as slowing to 7.9% in 2026 as vehicle re‑exports begin to normalize, before rising to 8.7% in 2027 as trade realigns to new markets. Growth in imports of goods and services is expected to decelerate to 6.6% in 2026 because of trade tensions before rising again in 2027 as geopolitical pressures abate. Money transfers are projected to fall by 7.6% in 2026 from declining inflows from Russian migrants before rebounding in 2027 on stronger transfers from other regions. Tourism revenues are expected to remain steady under the early stabilization scenario, but could weaken if geopolitical tensions in the Middle East intensify or disruptions persist.

Downside risks have intensified significantly, driven primarily by the ongoing and potentially prolonged conflict in the Middle East, which heightens the risk of supply disruptions and further increases in oil prices. Continued regional tensions could lead to economic dislocations, weakening the pace of global recovery and adding to inflationary pressures. If these conditions persist or intensify, outcomes could be weaker than projected. Elevated oil prices may further increase inflation, while disruptions to transit and a weakening of tourism are likely to widen Georgia`s current account deficit. Conversely, if the early stabilization scenario materializes, outcomes would align with the projections.

Since the 1990s, GVCs have given governments new ways to transition from import substitution and protectionist industrial policies. Today, GVCs account for more than 50% of all global trade and remain crucial for both advanced economies and emerging markets. Like many other economies, Georgia faces various constraints that hinder greater participation in GVCs. These include coordination and infrastructure gaps, limited access to markets due to stringent standards and regulatory requirements, insufficient knowledge spillovers, and limited technology transfers. Recent global developments, reflecting global trade wars and rising US tariffs, have created further uncertainty. At the same time, disruptions arising from the Russian invasion of Ukraine have accelerated the diversification of trade routes and redirected trade flows, creating new opportunities for strategically positioned economies. These developments have made strengthening linkages with regional and global trading partners essential to increase GVC participation and enhance economies of scale.

Georgia aspires to be a regional transport, trade, and logistics hub for global value chains. The government has prioritized measures supporting regional and global economic integration. The country offers a liberal business environment, an open trade regime supported by an expanding network of free trade agreements, strong macroeconomic performance, and demonstrated rapid growth. Reforms in customs procedures, logistics, digitalization, rail and port infrastructure, and multimodal transport have strengthened the country`s position as a transit and trade gateway. Strong contract enforcement, secure property rights, investor protections, flexible labor legislation, efficient dispute resolution, free capital movement, and a liberal tax regime further enhance its competitiveness.

Georgia can benefit from adopting more comprehensive approaches to deepening its engagement in GVCs. Logistics offer significant potential for GVC integration by creating new trade opportunities, stimulating cluster development, and supporting integrated economic zones. Tourism‑related supply chains and greater investor mobilization can reinforce real estate and location‑based development that aligns with GVCs. Expanding collaboration with foreign firms, financiers, and knowledge centers, and ensuring full alignment with EU standards - including their gradual adoption by small and medium enterprises - will help expand access to market intelligence and technological capabilities. Active government facilitation will be critical in this process. External actors, including nongovernmental organizations, can contribute to this process by providing networking support to help Georgia move up the value chain. Deepening multilateral engagement will further stimulate growth, create better jobs, and reduce poverty. With open and predictable policies from industrialized partners, the country can leverage its strategic location and institutional strengths to enhance its supplier networks and advance upstream in GVCs", - reads the report of ADB.