INTRODUCTION
The political and social turmoil surrounding the 26 October parliamentary elections and their aftermath have significant implications for Georgia's business environment. The prolonged polarization, government-led violence against protesters, and the suspension of EU accession talks create uncertainty that can negatively influence the economic climate in multiple ways. The crisis has now extended beyond the realm of partisan politics, presenting Georgia with an unavoidable socio-economic threat. Over 2,000 and counting small, medium, and large businesses have voiced their concerns, issuing a united statement that underscores the urgent need for de-escalation. Their declaration emphasizes the gravity of the situation, advocating for the announcement of new elections and the release of those detained during recent protests . These business representatives, acknowledging their responsibility for the country’s future and its irreversible development, stress that their appeal transcends political preferences and is rooted in the shared goal of safeguarding Georgia’s stability and prosperity.
The instability and erosion of public trust in state institutions deter both domestic and foreign investment. The suspension of EU accession talks could diminish Georgia’s appeal as a business-friendly environment aligned with European standards. Key institutions, such as the National Bank and others, saw their independence threatened by state interference. Once a model of reform and civil society development, Georgia now faces a growing risk to the autonomy of its institutions, undermining years of progress in governance, economic stability, and alignment with the EU. The preservation of independent and inclusive institutions is crucial for the country's future. This concern is intensified by a series of sanctions imposed by international partners. On December 12, 2024, the U.S. State Department introduced a new wave of visa restrictions targeting up to 20 Georgian citizens, including high-ranking officials from Georgian Dream, such as ministers, parliamentarians, law enforcement officers, security service officials, and private individuals, whose identities remain undisclosed. On December 19, the U.S. Department of the Treasury imposed Global Magnitsky sanctions on Interior Minister Vakhtang Gomelauri and the Deputy Director of the Special Tasks Department, Mirza Kezevadze. Finally, on December 27, the U.S. Treasury announced sanctions against billionaire and former Prime Minister Bidzina Ivanishvili, the founder and honorary chairman of Georgian Dream. Beyond the United States, Georgian officials have also faced sanctions from the United Kingdom, Lithuania, Latvia, Estonia, and Ukraine, reflecting widespread international concerns about governance and democratic standards in the country. Moreover, the United States has suspended $95 million in aid to Georgia, the European Union has frozen €121 million, and Sweden has ceased direct governmental cooperation, citing concerns over the country’s democratic trajectory.
The potential weakening of ties with the EU and US raises concerns over access to European markets, regulatory alignment, and eligibility for EU-funded programs, all of which are crucial for enhancing business competitiveness and economic integration. Moreover, businesses rely on predictable and stable political conditions to make strategic decisions, and the current crisis undermines investor confidence. This instability is further compounded by currency volatility, as exchange rate fluctuations increase the risks associated with cross-border investments. In addition, a potential downgrade in Georgia’s international credit ratings could further deter investors, increasing borrowing costs and reducing the country’s attractiveness as an investment destination. Moreover, this is particularly detrimental in sectors dependent on foreign direct investment (FDI), such as real estate, energy, and tourism, which are critical for Georgia's economic growth. Furthermore, declining business confidence and weakened expectations signal reduced private sector activity and investment inflows
For the complete paper, please refer to the attached policy document (above).