For the Georgian economy, 2021 was a year of gradual recovery from the COVID-19 pandemic. According to Geostat rapid estimates, the real GDP expanded by 10.7%, coming within 0.1 percentage points of the ISET-PI forecast from November 2021 and surpassing the NBG and IMF mid-year projections, which ranged between 8% - 8.5% y/y. While the high growth rate was driven in part by the low base of 2020, it was not merely a recovery from the pandemic-driven shock. The real GDP of 2021 went above the corresponding periods of 2019, implying a positive net increase in GDP. This GDP growth was fueled mainly by increased consumption and net exports, as the progressive restoration of international tourist flows significantly boosted the export of services and pent-up demand lifted consumer spending.
The GDP expansion process was challenged by rising inflation. Rising prices of international commodities fueled by the COVID-19-related restrictions, logistical challenges, and increased demand put an upward pressure on inflation in both developed and developing countries. Georgia was no exception, with the inflation rate reaching double digits in the second half of the year. The unemployment rate in 2021 increased by 2.1 percentage points y/y, reaching 20.6%. However, one could observe a declining trend in the unemployment indicator, as in the fourth quarter of 2021 the unemployment rate decreased by 1.4 pp compared with the corresponding period of 2020, and amounted to 19% y/y. Average annual labor force participation increased by 0.65% y/y; the number of hired employees contracted by 1.88% y/y, while the number of self-employed people decreased by 2.21% y/y. In the second half of 2021, labor productivity significantly increased. Correspondingly, gross salaries of employees averaged 1,463.8 GEL, showing a nominal annual growth of 22.9%. Additionally, according to the NBG Monetary Policy Report, the unit labor cost increased in 2020 due to economic contraction followed by a smaller decline in wages. As output started to recover, so did the productivity of labor, driving the decrease in unit labor cost.