SUMMARY

According to GeoStat’s preliminary estimates in the second quarter of 2024, Georgia’s nominal GDP reached GEL 24,855.7 million, with a year-over-year real GDP growth of 11.0% and a GDP deflator change of 4.3%. The growth was driven by significant increases in value-added across various sectors: Education activities rose by 35.6%, Information and communication rose by 32.8%, Construction by 30.9%, Financial and insurance activities by 22.9%, Public administration and defense, including social security by 14.7% and Wholesale and retail trade, including repair of motor vehicles and motorcycles by 11%. Conversely, there was a decline in value-added in electricity, gas, steam, and air conditioning supply by 13.6% and in Real estate activities by 4.9%. Trade accounted for the largest GDP share at 15.4%, followed by Manufacturing at 9.7, Real estate activities at 9.3%, Construction at 8.7%, Agriculture, forestry and fishing at 7.4%, Information and communication at 6.2%, Public administration at 6.2% and Transportation and Storage activities at 5.9%. The projected real GDP growth for 2024 from NBG is 8.5%, which is slightly below the IMF and WB projection of 7.6% and 7.5% y/y growth, respectively (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 third quarter of 2024, the Georgian Lari (GEL) depreciated compared to the previous year. Over the same period, the nominal effective exchange rate depreciated insignificantly.  It should be noted that GEL appreciated againstthe  USD by 1.1% the lira by 4%. The REER depreciated by 2.0% on a quarterly basis and by 9.6% year on year and the GEL real exchange rate depreciated against all main trading partners. 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, July 2024).

Compared to the increasing unemployment in Q3 of 2023 (15.6%), the unemployment rate in Q3 of 2024 fell to 13.3% (Geostat). Average annual labor force participation has also increased by 1.1pp, reaching 54.7%. Based on Geostat’s preliminary estimate, in the first quarter of 2024, average monthly nominal earnings reached 2056.7 GEL.

In conclusion, Georgia’s economy in the third 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 information and communication, real estate, education, and public administration. Despite a decline in foreign demand, domestic demand remains strong, with consumption remaining the primary driver of growth.

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