2013 Index of Economic Freedom

Georgia

overall score72.2
world rank21
Rule of Law

Property Rights45.0

Freedom From Corruption41.0

Limited Government

Government Spending68.9

Fiscal Freedom88.2

Regulatory Efficiency

Business Freedom90.6

Labor Freedom91.1

Monetary Freedom72.6

Open Markets

Trade Freedom89.2

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 4.5 million
  • GDP (PPP):
    • $24.5 billion
    • 7.0% growth
    • 4.7% 5-year compound annual growth
    • $5,491 per capita
  • Unemployment:
    • 16.3%
  • Inflation (CPI):
    • 8.5%
  • FDI Inflow:
    • $974.6 million
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Georgia’s economic freedom score is 72.2, making its economy the 21st freest in the 2013 Index. Its overall score is 2.8 points higher than last year, with improvements in six of the 10 economic freedoms including management of public finance, investment freedom, and property rights. Georgia is ranked 11th out of 43 countries in the Europe region, and its score is the most improved in the 2013 Index.

In a challenging global and regional environment, the Georgian economy has demonstrated a high level of resilience. After some backsliding last year, Georgia regained the status of “mostly free” in the 2013 Index. Persistent efforts to eliminate corruption and restore fiscal stability have borne fruit. Access to legal documents has been facilitated, and fiscal consolidation has generated narrowing budget deficits and lower public debt.

Despite this progress, however, momentum for comprehensive reforms to limit government spending and restrict the growth of economic regulations has flagged. Deeper institutional reforms to enhance judicial independence and effectiveness also remain critical.

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Background

President Mikheil Saakashvili and his center-right United National Movement won presidential and parliamentary elections in 2004 and 2008. However, billionaire Bidzina Ivanishvili and his Georgian Dream coalition decisively won parliamentary elections in late 2012, paving the way for Ivanishvili to become prime minister. Georgia is a leading economic reformer among the post-Soviet countries and has been particularly effective in fighting corruption. Russia’s continued military occupation of the Georgian provinces of Abkhazia and South Ossetia and recognition of their secession violates Georgia’s territorial integrity. Georgia left the Commonwealth of Independent States in August 2009. Relations with Russia remain difficult, but Georgia’s government has taken unilateral steps to improve ties. The economic recovery that began in 2010 continues, with an emphasis on tourism and construction.

Rule of LawView Methodology

Property Rights 45.0 Create a Graph using this measurement

Freedom From Corruption 41.0 Create a Graph using this measurement

Fighting the effects of Soviet-era corruption, the government has arrested former officials and policemen, radically downsized bureaucracies, and cracked down on smuggling. Several new “Public Service Halls” quickly deliver inexpensive legal documents such as birth certificates, passports, and property titles. Other efforts are underway to improve the security of property rights, though protection of intellectual property rights is largely ineffective.

Limited GovernmentView Methodology

The flat income tax rate is 20 percent, and the flat corporate tax rate is 15 percent. Other taxes include a value-added tax (VAT) and a tax on dividends. The overall tax burden equals 23.5 percent of total domestic income. Government spending has fallen to 32.2 percent of total domestic output. The budget balance has been in deficit, but public debt remains below 35 percent of GDP. Budget management has helped to stabilize the fiscal situation since the 2008 war.

Regulatory EfficiencyView Methodology

The competitive regulatory framework is conducive to entrepreneurial activity. It takes only two procedures and two days to launch a business, and no minimum capital is required. Reform of bankruptcy and licensing requirements has slowed. The non-salary cost of hiring a worker is moderate, and regulations on work hours are flexible. Inflation has decelerated. Prices are generally set in the market, but the state maintains price controls.

Open MarketsView Methodology

After achieving independence, Georgia unilaterally slashed import barriers. The trade-weighted average tariff rate is one of the world’s lowest at 0.4 percent, and non-tariff barriers are relatively modest. Foreign and domestic investments receive equal treatment. The growing banking sector offers improved access to financing, although the stock exchange remains small and underdeveloped.

Country's Score Over Time

Bar Graph of Georgia Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Georgia to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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