Follow us on social

Georgia: Election was just as much about the economy

Georgia: Election was just as much about the economy

Closer ties to Europe have not helped Tbilisi on the fiscal front, just look at the numbers

Analysis | Europe

Indignant western armchair pundits and politicians have fallen into collective rage, signallng that the general election result in Georgia equated to the theft of a European choice.

The opposition to the apparent winner, the ruling Georgia Dream party, is now being joined by international voices, including the U.S., calling for an investigation into claims of election violations.

But Western politicians, journalists, and NGOs have cynically, and in a way, willfully ignored the wider economic picture, and have instead spun up the election as an existential struggle between Europe (European Union) and Russia. There is so much nuance here that needs to be examined and is not.

For one, study the vast amount of credible economic data and you’ll uncover the unpalatable truth that Georgia has been a net loser from closer EU economic ties thus far. And that the war in Ukraine, which the EU is helping to bankroll, has halted progress on key economic priorities in Georgia, including reducing unemployment.

Taking a step back, Georgia has become an economic dynamo since 2012 through its sovereign endeavors. This small, proud nation with a population of 3.1 million, ranks number 7 in the World Bank’s ease of doing business index, ahead of the UK and every EU country except Denmark.

Average economic growth has been a throaty 5.2%, 6.2% percent if you subtract the pandemic contraction in 2020. GDP per capita has increased by 79%. According to the World Bank, poverty reduced from 70.6% to 40.1% between 2010 and 2023, through sound macroeconomic management. There’s still more work to do to get it lower.

Georgia’s economic growth performance has largely been driven by domestic investment. As a percentage of GDP, investment has averaged a brisk 26.6% per year since 1996, compared to the EU (21.8%) and the UK (18.8%).

Yet signing the EU Deep and Comprehensive Free Trade Agreement (DCFTA) in 2014 didn’t unleash a tidal wave of new European investment into Georgia.

EU foreign direct investment in 2024 was only $65k higher than in 2014, at an average 29.6% of total FDI in Georgia over that period. Russia is a significant but not key investment player, accounting for just 5.4% of FDI in 2023.

If we look at trade, the signing of the DCFTA, in theory at least, should have driven a mutually beneficial surge in trade. But that simply hasn’t happened.

The European Commission website proudly announces that Europe is Georgia’s biggest trade partner. But EU trade with Georgia accounts for just 20.9% of the total. And that is only because Georgia has been flooded with European exports since 2016.

In fact, western European states have been eating Georgia’s lunch when it comes to trade. On average, Georgia’s eight largest western European trade partners (including the UK) now export four times as much to Georgia than they import. The biggest culprit is Germany which in 2022 exported 7.8 times more ($673 million) to Georgia than it received in imports ($86 million). European exports to Georgia had quadrupled to 3.6 billion Euros by 2023 and are still rising.

Yet, Georgian exports to the EU have stood still. Why?

Look on the EU website and you will find 58 separate trade defense investigations by Europe against Georgia since 2021, looking to restrict imports of everything from tires to tinplate and tableware. Europe actively places barriers against Georgian imports. Georgia has been accused of helping Russia evade export sanctions, but the evidence for that is weak.

Look East and you will see a different picture. Bulgaria exports as much to Georgia as the powerful western EU nations combined, yet is the only EU trading nation that imports more from Georgia than it exports.

Because trade is all about gravity. Sofia is much closer to Tbilisi than Strasbourg. Countries trade more with those countries closer to their borders because the cost of trade is lower.

Through a mix of gravity and history, 62.2% of Georgia’s exports go to its eight biggest Eurasian trade partners (former Soviet states, Turkey, China and India). And the trade balance is more even than it is with Europe, as Eurasian states export 1.8 times more to Georgia than they import. Russia exported 2.9 times more than Georgia in 2022 because of a surge in fuel exports. However, Georgian exports to Russia have also increased by 56% since 2017 and now make up 9.4% of the total.

The major economic shock Georgia has had to confront has been the war in Ukraine. A net 87,200 people from Russia, Ukraine and Belarus emigrated to Georgia between 2022 and 2023, two thirds of them Russian. Historically, Georgia had fairly even net migration, but the war-induced influx prompted unprecedented house price inflation of around 35% with rents up by as much as 50%.

High inflation during the first two years of the Ukraine war appears to have been tamed by the National Bank of Georgia which hiked interest rates to their highest level since the Global Financial Crisis.

An economic flip side, is that Georgia saw a much needed boost in its current account which recorded its only significant surplus since the Soviet period in the third quarter of 2022. This was driven by surging service exports, that is, foreign money spent by migrants in Georgia. Foreign Exchange reserves also rose to a post-Soviet high.

But the influx of Russians fleeing the draft undoubtedly increased resentment and social tension in part driven by historical enmity, including around the 2008 Georgian war. But it runs deeper. Georgia’s impressive reduction in unemployment has also flat-lined, having dropped from 20.6% in 2009 to 11.6% in 2020. Worryingly, 26.7% of Georgia’s young people are unemployed, and have seen young, digitally nomadic, middle class Russians crowding out opportunities in high-valued-added sectors.

The West has framed the election and its results in almost Manichean terms, a battle of light and dark, between Europe and Russia. They have positioned Georgia Dream’s founder Bidzina Ivanishvili, as a Kremlin stooge. Yes, Ivanishvili, like many oligarchs, gained his wealth during the chaos of Soviet collapse. His nationalism is rooted in a conservatism that has echoes of Putin’s Russia and Orban’s Hungary.

But his economic approach in Georgia has been driven by specifically Georgian considerations. And elections always, ultimately, get tipped by domestic issues.

By today’s election count, it would seem a majority of Georgian people chose prosperity over war. It’s time to let Georgia’s government get back to the task of strengthening their wonderful country still further.


Top photo credit: Supporters of the Georgian Dream party celebrate at the party's headquarters after the announcement of exit poll results in parliamentary elections, in Tbilisi, Georgia October 26, 2024. REUTERS/Irakli Gedenidze
Analysis | Europe
 Abdel Fattah al-Burhan Sudan
Top image credit: Sudan's army chief Abdel Fattah al-Burhan gestures to soldiers inside the presidential palace after the Sudanese army said it had taken control of the building, in the capital Khartoum, Sudan March 26, 2025. Sudan Transitional Sovereignty Council/Handout via REUTERS

Saudi Arabia chooses sides in Sudan's civil war

Africa

In the final days of Ramadan, before Mecca's Grand Mosque, Sudan's de facto president and army chief, General Abdel Fattah al-Burhan knelt in prayer beside Saudi Crown Prince Mohammed Bin Salman. Al-Burhan had arrived in the kingdom just two days after his troops dealt a significant blow to the paramilitary Rapid Support Forces (RSF), recapturing the capital Khartoum after two years of civil war. Missing from the frame was the United Arab Emirates (UAE), the Gulf power that has backed al-Burhan’s rivals in Sudan’s civil war with arms, mercenaries, and political cover.

The scene captured the essence of a deepening rift between Saudi Arabia and the UAE — once allies in reshaping the Arab world, now architects of competing visions for Sudan and the region.

For two years, Sudan has been enveloped in chaos. The conflict that erupted in April 2023 between the Sudanese Armed forces (SAF) and the RSF, led by General Mohamed Hamdan Dagalo "Hemedti," has inflicted immense suffering: an estimated 150,000 killed, allegations of mass atrocities staining both sides but particularly the RSF in Darfur, 12 million displaced, and over half the population facing acute food insecurity.

keep readingShow less
Donald Trump Massad Boulos
Top image credit: Republican presidential nominee and former U.S. President Donald Trump is joined by Massad Boulos, who was recently named as a 'senior advisor to the President on Arab and Middle Eastern Affairs,' during a campaign stop at the Great Commoner restaurant in Dearborn, Michigan, U.S., on November 1, 2024. REUTERS/Brian Snyder/File Photo

Trump tasks first time envoy with the most complex Africa conflict

Africa

As the war between the Democratic Republic of the Congo (DRC) and allied militias against the Rwandan-backed M23 rebel group continues, the Trump administration is reportedly tapping Massad Boulos as the State Department’s special envoy to the African Great Lakes region.

In this capacity, Boulos will be responsible for leading the American diplomatic effort to bring long-desired stability to the region and to end a conflict that has been raging in the eastern DRC for decades.

keep readingShow less
Sens. Paul and Merkley to Trump: Are we 'stumbling' into another war?
Top photo credit: Sen. Rand Paul (R-Ky) (Gage Skidmore /Creative Commons) and Sen. Jeff Merkley (D-Ore.) )( USDA photo by Preston Keres)

Sens. Paul and Merkley to Trump: Are we 'stumbling' into another war?

QiOSK

Senators Rand Paul (R-Ky.) and Jeff Merkley (D-Ore.) have co-written a letter to the White House, demanding to know the administration’s strategy behind the now-18 days of airstrikes against the Houthis in Yemen.

The letter calls into question the supposed intent of these strikes “to establish deterrence,” acknowledging that neither the Biden administration’s strikes in October 2023, nor the years-long bombing campaign by Saudi Arabia from 2014 to 2020, were successful in debilitating the military organization's military capabilities.

keep readingShow less

Trump transition

Latest

Newsletter

Subscribe now to our weekly round-up and don't miss a beat with your favorite RS contributors and reporters, as well as staff analysis, opinion, and news promoting a positive, non-partisan vision of U.S. foreign policy.