Many Georgian economic sectors are well positioned to increase exports to Europe, according to the findings of a new study commissioned by the European Union and United Nations. The report’s contents paint a picture of an economy eager to do business with Europe at a time when many Georgians say the government is undermining the country’s relationship with the EU.
The UN report, titled “Georgia’s Economy Sectors with High Growth and Export Potential,” is based on interviews with industry stakeholders and provides a snapshot of recent economic trends in the country.
The report fittingly found the wine & beverage sector as among those having the most promising export potential. The report also identified the transport, telecoms/IT, mining and clothes manufacturing sectors as having favorable export possibilities.
Georgia and Europe signed an association agreement in 2014, but the UN report highlights how Georgian companies have struggled to take full advantage of preferential trade opportunities. Numerous logistical challenges continue to impede westward trade, leaving Georgian exporters – including winemakers – dependent on traditional markets, such as Russia and Turkey.
“The main challenges hindering [EU-bound] export growth are associated with obtaining the necessary certifications and meeting EU quality and standard requirements for specific products,” the report states. “Other obstacles include a lack of information on export potential and procedures, as well as insufficient production capacity for export.”
Companies need capital to overcome existing barriers but the capital market in Georgia is not well developed, said Davit Keshelava, head of macroeconomic policy research at the International School of Economics in Tbilisi. “Access to finance is a big issue because the major source of funding is bank loans, which are quite expensive,” Keshelava told Eurasianet.
The government, dominated by the Georgian Dream party, is injecting an element of uncertainty into the equation. Its recent geopolitical pivot away from the West, punctuated by the adoption of illiberal legislation earlier in 2024, has alienated the EU and United States. Georgia’s constitutionally mandated effort to join the EU is now at a standstill. Officials in Brussels and Washington have stated that Georgian Dream needs to reverse its present policy direction for the country’s accession hopes for the EU and NATO to be revived. Public opinion surveys show solid support for Georgia’s integration with Western institutions.
There were initial signs this spring that Georgian Dream’s policy drift away from the West would have an adverse impact on the economy. But the full economic effects of this pivot, if any, have yet to be determined.
With pivotal parliamentary elections looming in October, government officials are keen to project an image of business as usual. In a report on the country’s economic performance during the first half of 2024, the state statistics agency, Geostat, reported the country experienced strong GDP growth during the period, compared with the same timeframe in 2023. At the same time the value of FOB exports declined year-on-year by 6.7 percent during the first half. In addition, “external merchandise trade turnover” declined y-o-y 1.8 percent during the first six months of 2024.
By Brawley Benson via Eurasianet.org
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