SUMMARY

According to GeoStat’s preliminary estimates in the second quarter of 2024, Georgia’s nominal GDP reached GEL 22,101.7 million, with a year-over-year real GDP growth of 9.6% and a GDP deflator change of 2.5%. The growth was driven by significant increases in value-added across various sectors: Accommodation and food service activities rose by 35.7%, Education by 21.3%, household activities as employers and producers of goods and services for personal use by 17.3%, Transportation and storage by 16.1%, Public administration and defense, including social security, by 13.3%, and Construction by  13%. Conversely, there was a decline in value-added in electricity, gas, steam, and air conditioning supply by -6.3% and  in other service activities by -1.4%. Trade accounted for the largest GDP share at 15%, followed by Real estate activities at 9.8%, Manufacturing at 9.1%, Construction at 8.4%, Public administration at 7.4%, Agriculture, forestry and fishing at 7.2%, Education at 6%, Transportation and Storage activities at 5.9%, Information and communication at 5.9%, and Financial and insurance activities at 5.1%. The projected real GDP growth for 2024 from NBG is 6.8%, which is slightly below the IMF and WB projection of 5.7% y/y growth (Figure 1).

In 2023, Georgia’s economic growth was primarily fueled by strong domestic demand. Conversely, foreign demand waned, contributing negatively to growth in the fourth quarter due to the diminishing migration effect. The previous year’s surge in migration had significantly boosted traveler revenue, with service exports soaring by 87.9%. However, the growth rate of income from travelers fell in 2023 because of the base effect and a reduction in migrant numbers. Despite this, structural changes in the economy, particularly a rise in information and computer service exports from 0.4% to 2.6% of GDP, helped offset the decline and propelled the economy’s overall potential.

In the second quarter of 2024, the GEL appreciated compared to the previous year, driven by a robust nominal effective exchange rate. This was offset by Georgia’s relatively lower consumer price inflation, which helped maintain its economic competitiveness. GEL’s real effective exchange rate appreciation is attributed to deep-seated changes in the current account structure, not merely to short-term economic cycles. These changes, which began with the Russia-Ukraine conflict in 2022, are reflected in the increased service exports from Georgia, particularly in the IT and transportation sectors. The country’s strategic position as a transit hub has also led to a surge in cargo and logistics services, indicating that GEL’s exchange rate may stabilize without significant depreciation.

Georgia’s stringent monetary policy has effectively curbed inflation expectations, bringing domestic inflation below the target level. The decrease in service prices has been a significant factor in this reduction, alongside the diminishing effect of previously increased apartment rental costs due to a surge in foreign visitors. These factors have collectively contributed to a more stable inflation rate, aligning with the country’s monetary goals (NBG, May 2024).

Compared to the increasing unemployment in Q2 of 2023 (16.7%), the unemployment rate in Q2 of 2024 fell to 13.7% (Geostat). Average annual labor force participation has also increased by 1.3pp, reaching 54.5%. Based on Geostat’s preliminary estimate, in the first quarter of 2024, average monthly nominal earnings reached 2004.9 GEL.

In conclusion, Georgia’s economy in the second quarter of 2024 has shown robust growth with a notable increase in nominal GDP and real GDP growth. This positive trend is reflected across various sectors, particularly in real estate, education, and public administration. Despite a decline in foreign demand, domestic demand remains strong, and GEL has appreciated, supported by structural changes in the economy and a strategic position in regional trade.

For the complete index publication, please refer to the attached document (above).