Strong economic growth maintained in Georgia in 2025 - European Commission report

According to the “European Economic Forecast Spring 2026”, strong economic growth maintained in Georgia in 2025.

“Following another year of economic expansion in 2025, Georgia’s GDP growth is projected to decelerate but to remain robust at 5-5.5% in 2026 and 2027. The impact of the conflict in the Middle East on growth is likely to be relatively limited and is channelled mainly through higher energy prices. Services, such as ICT, education and tourism, are expected to be the main drivers of growth. Inflation picked up last year due to rising food prices and demand pressures and is set to stay elevated in 2026, due to high energy prices. The current account deficit is projected to widen, driven by the increasing bill on imported oil and gas. The general government deficit is expected to remain low, supported by strong growth.

Strong, but easing economic growth

Economic growth remained very strong in 2025 at 7.5%, despite decelerating from 9.7% recorded in 2024. On the supply side, growth was driven by services, in particular ICT and education, and by manufacturing, while the contribution of agriculture and mining was negative. On the demand side, private and government consumption remained the main contributors to growth, supported by rising wages, spending of Russian migrants and an increase in remittances. In contrast to previous years, investment decreased in real terms in 2025, due to delays in public investment projects and low foreign direct investment inflow. The contribution of net exports was slightly positive. Due to increased surplus in services and inflow of remittances, current account deficit narrowed down to 2.7% of GDP in 2025.

Looking ahead, growth is set to reach 5-5.5% in 2026 and 2027, in line with its long-term potential. Economic activity is expected to remain driven by private and public consumption, supported by continued, albeit slower, increases in real wages, strong consumer lending and inflow of remittances. Investment growth is set to remain subdued amid weakened business confidence, reflecting the increased uncertainty linked to the domestic political situation. The external sector shows mixed prospects. Service exports in ICT, transport and tourism sectors are projected to grow substantially, while weak export capacity restricts the possibility to expand merchandise exports in the short term. As Georgia depends entirely on imports for fossil fuels, rising energy costs and increased imports of consumer goods are projected to deteriorate its current account deficit to some 4% of GDP in 2026. The forecast is subject to both downside and upside risks, including those related to the uncertain domestic political situation. A potential end of Russia’s war of aggression against Ukraine could reverse some economic gains for Georgia, but the country would benefit from greater stability in the region.

Labour market situation slightly deteriorating

Labour market indicators slightly deteriorated in 2025, after several years of gradual improvement. Employment declined by 1% in comparison to 2024, particularly among selfemployed workers. At the same time, the unemployment rate remained relatively high at 13.9%, unchanged from 2024. In the context of robust economic growth, persistent labour shortages in some sectors and continuous reform of employment services, the deterioration of the labour market appears temporary and the situation is expected to improve from 2026 onwards.
Preliminary data indicate a strong increase in wages, by 11% in real terms in 2025, similar to the increases in 2023 and 2024. It was driven by pay rises in the public sector and in branches experiencing labour shortages, such as construction. Real wage growth is projected, however, to moderate in 2026 and 2027.

Inflation above the target

Consumer price inflation increased from 1% in 2024 to 3.9% in 2025, reaching 5.9% y-o-y in April 2026. This uptick was mainly due to rising prices of food, energy and certain services, spurred by wage increases and demand pressures. Core inflation excluding energy and food was lower than the headline CPI, at 3.5% in April. The central bank maintained a cautious stance, keeping the policy unchanged at 8% since May 2024. Looking ahead, inflation is projected to stay elevated in 2026, driven by higher fuel and other energy prices, before easing to the 3% target in 2027 as these pressures are expected to gradually fade.

Limited fiscal deficit, with public debt on a downward path

The general government deficit in 2025 narrowed to under 1% of GDP, lower than in previous years. Revenues increased by 13%, broadly in line with the nominal GDP growth (12%). Current expenditure increased by 16% over the same period, mainly due to a strong increase in public sector salaries and higher social benefits and subsidies. Capital expenditure declined by 20%, reflecting delays in public investment projects. The deficit is expected to widen to just above 2% of GDP in 2026 and 2027, but to remain below the 3% of GDP ceiling implied by the country’s fiscal rule. The general government debt stood at 36.1% of GDP in 2025 and is expected to gradually decrease below 35% of GDP in 2027 on account of the contained deficits and robust growth. In January 2026, Georgia successfully rolled over USD 500 million of maturing Eurobonds, at a low 5.1% interest rate”, - reads the report.