Archaeological research demonstrates that Georgia has been involved in commerce with many lands and empires since ancient times, largely due its location on the Black Sea and later on the historical Silk Road. Gold, silver, copper and iron have been mined in the Caucasus Mountains. Georgian wine making is a very old tradition and a key branch of the country’s economy. The country has sizable hydropower resources. Throughout Georgia’s modern history agriculture and tourism have been principal economic sectors, because of the country’s climate and topography.
For much of the 20th century, Georgia’s economy was within the Soviet model of command economy. Since the fall of the USSR in 1991, Georgia embarked on a major structural reform designed to transition to a free market economy. As with all other post-Soviet states, Georgia faced a severe economic collapse. The civil war and military conflicts in South Ossetia and Abkhazia aggravated the crisis. The agriculture and industry output diminished. By 1994 the gross domestic product had shrunk to a quarter of that of 1989.
Since the early 21st century visible positive developments have been observed in the economy of Georgia. In 2007, Georgia’s real GDP growth rate reached 12 percent, making Georgia one of the fastest-growing economies in Eastern Europe. The World Bank dubbed Georgia “the number one economic reformer in the world” because it has in one year improved from rank 112th to 18th in terms of ease of doing business. Georgia improved its position to 6th in World Bank’s Doing Business report 2019.
The 2006 ban on imports of Georgian wine to Russia, one of Georgia’s biggest trading partners, and break of financial links was described by the IMF Mission as an “external shock”. In addition, Russia increased the price of gas for Georgia. Around the same time, the National Bank of Georgia stated that ongoing inflation in the country was mainly triggered by external reasons, including Russia’s economic embargo. The Georgian authorities expected that the current account deficit due to the embargo in 2007 would be financed by “higher foreign exchange proceeds generated by the large inflow of foreign direct investment” and an increase in tourist revenues. The country has also maintained a solid credit in international market securities. Georgia is becoming more integrated into the global trading network: its 2015 imports and exports account for 50% and 21% of GDP respectively. Georgia’s main imports are fuels, vehicles, machinery and parts, grain and other foods, pharmaceuticals. Main exports are vehicles, ferro-alloys, fertilizers, nuts, scrap metal, gold, copper ores.
Georgia is developing into an international transport corridor through Batumi and Poti ports, Baku–Tbilisi–Kars Railway line, an oil pipeline from Baku through Tbilisi to Ceyhan, the Baku–Tbilisi–Ceyhan pipeline (BTC) and a parallel gas pipeline, the South Caucasus Pipeline.
Since coming to power the Saakashvili administration accomplished a series of reforms aimed at improving tax collection. Among other things a flat income tax was introduced in 2004. As a result, budget revenues have increased fourfold and a once large budget deficit has turned into a surplus.
As of 2001, 54 percent of the population lived below the national poverty line but by 2006 poverty decreased to 34 percent, by 2015 it is 10.1 percent. In 2015, the average monthly income of a household was 1,022.3₾ (about $426). 2015 calculations place Georgia’s nominal GDP at US$13.98 billion. Georgia’s economy is becoming more devoted to services (as of 2016, representing 68.3 percent of GDP), moving away from the agricultural sector (9.2 percent).
In regards to telecommunication infrastructure, Georgia is ranked the last among its bordering neighbors in the World Economic Forum’s Network Readiness Index (NRI) – an indicator for determining the development level of a country’s information and communication technologies. Georgia ranked number 58 overall in the 2016 NRI ranking, up from 60 in 2015.