2020 Index of Economic Freedom

Georgia

OVERALL SCORE77.1
WORLD RANK12
Rule of Law

Property Rights68.6

Judicial Effectiveness57.9

Government Integrity64.8

Government Size

Tax Burden87.1

Government Spending73.6

Fiscal Health94.4

Regulatory Efficiency

Business Freedom85.3

Labor Freedom76.3

Monetary Freedom78.3

Open Markets

Trade Freedom88.6

Investment Freedom80.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 3.7 million
  • GDP (PPP):
    • $42.6 billion
    • 4.7% growth
    • 4.0% 5-year compound annual growth
    • $11,485 per capita
  • Unemployment:
    • 14.1%
  • Inflation (CPI):
    • 2.6%
  • FDI Inflow:
    • $1.2 billion

Georgia’s economic freedom score is 77.1, making its economy the 12th freest in the 2020 Index. Its overall score has increased by 1.2 points with noticeable improvements on all indicators related to the rule of law. Georgia is ranked 6th among 45 countries in the Europe region, and its overall score is well above the regional and world averages.

The Georgian economy continues its spectacular, seven-year run up the ranks of the mostly free. GDP has also been expanding at a healthy rate for the past five years.

Multi-year reforms to reduce corruption, cut regulation, and simplify taxes have led to upward movement in all aspects of economic freedom. A top-10 ranking will require even more intensive efforts to improve perceptions of government integrity and judicial effectiveness. A good first step to avoid controversies over judicial appointments would be legislative action to protect the independence of the judiciary.

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Background

Georgia was forcibly incorporated into the Soviet Union in 1921 and regained its independence in 1991. Russia invaded Georgia in 2008 and continues to occupy the South Ossetia and Abkhazia regions, which account for approximately 20 percent of Georgia’s territory. Weeks of protests in mid-2019 highlighted continuing Georgia–Russia tensions. Georgian Dream continues to be the country’s ruling party, but Mamuka Bakhtadze was replaced as prime minister in September 2019 by controversial Minister of Internal Affairs Gerogi Gakharia, whose resignation had been demanded during the protests. Georgia’s economy has improved noticeably after years of economic recession. Agriculture and related industries employ over half of the workforce. Georgia remains an official aspirant for NATO membership.

Rule of LawView Methodology

Property Rights 68.6 Create a Graph using this measurement

Judicial Effectiveness 57.9 Create a Graph using this measurement

Government Integrity 64.8 Create a Graph using this measurement

Secured interests in both real and personal property are recognized and recorded, but deficiencies in court operations can keep investors from realizing their rights in property offered as collateral. Despite ongoing judicial reforms, substantial executive and legislative interference in the courts persists. Georgia has made great progress in fighting petty corruption, but high-level “elite corruption” by public officials remains a problem.

Government SizeView Methodology

The flat individual 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 25.7 percent of total domestic income. Government spending has amounted to 9.6 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 1.0 percent of GDP. Public debt is equivalent to 44.5 percent of GDP.

Regulatory EfficiencyView Methodology

Georgia has recently made a number of business-friendly changes, although requiring that a value-added tax must be levied on advance payments for goods and services has increased business costs. Business friendliness outstrips business friendliness in other post-Soviet countries. Labor costs are low. Privatization of many water and power utility companies in Georgia has reduced the cost of government subsidies.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 121.7 percent of GDP. The average applied tariff rate is 0.7 percent, and 66 nontariff measures are in force. Foreign and domestic investments receive equal treatment, but transparency is an issue. With the banking sector growing and modernized, access to financing has improved. The stock exchange is small and underdeveloped.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland820.1
2Ireland80.90.4
3United Kingdom79.30.4
4Denmark78.31.6
5Estonia77.71.1
6Georgia77.11.2
7Iceland77.10.0
8Netherlands770.2
9Lithuania76.72.5
10Luxembourg75.8-0.1
11Finland75.70.8
12Sweden74.9-0.3
13Czech Republic74.81.1
14Germany73.50.0
15Norway73.40.4
16Austria73.31.3
17Latvia71.91.5
18Armenia70.62.9
19Bulgaria70.21.2
20Cyprus70.12.0
21Romania69.71.1
22North Macedonia69.5-1.6
23Malta69.50.9
24Azerbaijan69.33.9
25Poland69.11.3
26Belgium68.91.6
27Slovenia67.82.3
28Kosovo67.40.4
29Portugal671.7
30Albania66.90.4
31Spain66.91.2
32Slovakia66.81.8
33Hungary 66.41.4
34France662.2
35Serbia 662.1
36Turkey64.4-0.2
37Italy63.81.6
38Bosnia and Herzegovina62.60.7
39Croatia62.20.8
40Moldova622.9
41Belarus61.73.8
42Montenegro61.51.0
43Russia612.1
44Greece59.92.2
45Ukraine54.92.6
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