2018 Index of Economic Freedom

Georgia

overall score76.2
world rank16
Rule of Law

Property Rights62.8

Government Integrity61.8

Judicial Effectiveness64.2

Government Size

Government Spending73.3

Tax Burden87.0

Fiscal Health91.8

Regulatory Efficiency

Business Freedom86.9

Labor Freedom77.3

Monetary Freedom79.6

Open Markets

Trade Freedom89.4

Investment Freedom80.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 3.7 million
  • GDP (PPP):
    • $37.2 billion
    • 2.8% growth
    • 4.0% 5-year compound annual growth
    • $10,044 per capita
  • Unemployment:
    • 11.6%
  • Inflation (CPI):
    • 2.1%
  • FDI Inflow:
    • $1.7 billion
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Georgia’s economic freedom score is 76.2, making its economy the 16th freest in the 2018 Index. Its overall score has increased by 0.2 point, with a substantial improvement in property rights offsetting modest declines in government integrity, judicial effectiveness, and fiscal health. Georgia is ranked 9th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

Since the 2003 “Rose Revolution,” reforms by successive administrations have reduced petty corruption, cut regulation, simplified taxes, opened markets, and developed transport and energy infrastructure. The government hopes that further reductions in regulation, taxes, and corruption will attract foreign investment and stimulate renewed growth. Its maintenance of monetary stability and overall sound fiscal health has fostered macroeconomic resilience. Nonetheless, deeper and more rapid institutional reforms to enhance judicial independence and effectiveness remain important for ensuring dynamic and lasting economic development.

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Background

Georgia was forcibly incorporated into the Soviet Union in 1921 and gained its independence in 1991. Russia invaded Georgia in 2008 and still occupies its South Ossetia and Abkhazia regions—about 20 percent of the country’s territory. In 2012, billionaire Bidzina Ivanishvili’s Georgian Dream coalition defeated President Mikheil Saakashvili’s United National Movement. Prime Minister Giorgi Kvirikashvili and Georgian Dream’s victory in the 2016 parliamentary elections reinforced the coalition’s political dominance. Georgia has been affected by the regional economic downturn. Agriculture and related industries employ over half of the workforce. Georgia signed an Association Agreement with the European Union in 2014 and is firmly committed to Euro-Atlantic integration and to securing visa-free travel to the Schengen Area in 2017.

Rule of LawView Methodology

Property Rights 62.8 Create a Graph using this measurement

Government Integrity 61.8 Create a Graph using this measurement

Judicial Effectiveness 64.2 Create a Graph using this measurement

The constitution protects property rights, including ownership, acquisition, disposal, and inheritance of property. Enforcement of contracts has improved. The constitution provides for an independent and impartial judiciary in civil matters, but the professionalism of civil judges and transparency of their adjudication are uncertain. Lingering Soviet-era corruption and ongoing Russian influence remain problematic.

Government SizeView Methodology

The flat income tax rate is 20 percent, and the flat corporate tax rate is 15 percent. Other taxes include value-added and dividends taxes. The overall tax burden equals 25.9 percent of total domestic income. Over the past three years, government spending has amounted to 29.8 percent of total output (GDP), and budget deficits have averaged 1.6 percent of GDP. Public debt is equivalent to 44.9 percent of GDP.

Regulatory EfficiencyView Methodology

During 2016, the reliability of electricity service improved, and protections for minority-stake investors were strengthened. The cost of hiring a worker compares favorably to the cost in most other European countries, but the labor market lacks dynamism, and unemployment is fairly high. Dollarization of the economy is high; over 60 percent of bank loans are denominated in foreign currency, and the local currency continued to devalue in 2017.

Open MarketsView Methodology

Trade is extremely important to Georgia’s economy; the combined value of exports and imports equals 103 percent of GDP. The average applied tariff rate is 0.3 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. The growing banking sector offers improved access to financing, but the stock exchange remains small and underdeveloped.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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