The economy of Georgia after the collapse of the USSR and its development (briefly). Place of Georgia in the global economy

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Georgia's economy was industrializing at a rapid pace even during the entry of the state into the USSR. Since the mid-1910s, in 60 years, the national treasury has grown almost 100 times. It was in Georgia that the highest salaries and social payments were. Huge sums were spent by the government on the transition from the agricultural sector to the industrial one. By the early 1980s, the country had developed the production of petroleum products, metal products, and equipment. It is also worth noting the high foreign trade performance.

Economy of Georgia after the collapse of the USSR

In the first years after the collapse of the Soviet Union, the country's budget underwent huge changes. The main reason for the negative trends in the domestic economy was the prohibition of the President of Georgia to conduct any trade relations with Russia. The consequence of this was a sharp decline in the state's industrial indicators to 60% by the end of 1992.

A couple of years later, the crisis swept not only large-scale production, but also all other industries. The forestry of Georgia, famous in Soviet times, has completely ceased to exist. Transport and production facilities were destroyedinfrastructure. The monetary unit depreciated by 9000%. The result of the rollback of production was mass unemployment, lower wages.

The formation and development of the Georgian economy began only by the end of 1995. The reason was impressive loans from the World Bank. Fortunately, inflation was stopped, effective reforms were carried out in the spheres of industry and services. Since 1996, the country has finally begun to experience a financial boom.

In the mid-2000s, 60% of tax payments were truncated, large foreign investors were attracted, and relations with world creditors were established. In recent years, the Georgian economy has been supported by foreign business partners and constant credit injections.

Agriculture

Today, the Georgian economy can be briefly described as a stable post-industrial one. However, agriculture still plays a significant role in it. From 1993 to 2008, the indicators of the agricultural sector decreased to the level of 25%. This share is evenly distributed between cultivated land and animal husbandry.

After the economic crisis of the mid-2000s, the Georgian authorities stopped allocating large sums to support agriculture. At the moment, only 16% of land suitable for sowing remains in the country. Most of the land was transferred to private businessmen and farmers. The share of the agricultural sector is only 12% of the country's GDP.

Recently, plant crops give extremely lowproductivity. The whole reason is a chronic shortage of fertilizers and modern technology. It is noteworthy that now Georgia for the first time in its history is in dire need of additional grain imports. Grape lands decreased by 75%, tea - by 94%, cultivated - by almost 50%.

As for animal husbandry, there is also a negative trend here. Revenues from this industry fell by almost 80%.

Industry indicators

A negative trend in the last 20 years has been observed in the manufacturing sector. The indicators of the country's industry fell to 12%. Every year, the Georgian economy is replenished by this industry by 2-2.5 billion dollars.

The most profitable and developed are the light and food industries, as well as non-ferrous metallurgy. Recently, there has been an increase in production in the extractive and mining industries, in water supply, gas, wood processing and minerals.

The food industry is a pillar of the Georgian economy. Drinks and products of this country are known far beyond its borders. This is especially true for tea, brandy, wine, cigarettes, oilseeds, mineral waters, some fruits and vegetables.

Not to mention the chemical industry. Its share in the country's manufacturing sector is about 6%. Nitrogen fertilizers, paint and varnish products and chemical fibers are considered the most demanded products of the industry.

Energy and fuel complex

Georgian economy experiences significant losses every year due to 100%import of petroleum products. Most of the fuel is purchased from Azerbaijan. The situation is similar with natural gas, but Russia remains the main supplier here.

The energy complex of the country rests on several large thermal and hydraulic stations. Interestingly, a significant part of the generating capacity is controlled by Russian investors. Another distinctive feature of the Georgian energy complex is the parallel operation of all internal systems together with Azerbaijan.

There are only two thermal stations, but they are able to cover 2/3 of the country's territory. As for the hydropower complex, its heart is the Inguri HPP, capable of developing a capacity of up to 1,300 MW. Of the smaller stations, one can single out Perepadnaya and Vartsikhe.

Other sectors of the economy

Telecommunications make a significant contribution to the state budget every year. Their profit is estimated at 4% of GDP. A leap in the development of this area of activity was observed at the end of 2008. It is noteworthy that Georgia ranks third in the world in terms of the high cost of cellular communications.

Foreign trade of recent years is characterized by a significant decline. The negative balance is determined by the increase in demand and needs for imports rather than exports. Ferroalloys and raw gold are considered the most demanded Georgian goods.

The volume of extraction of such resources as coal, manganese and copper ores is also falling. But there is an influx of tourists due to the abolition of the visa regime.

Financial structure

Significant decline in all industries and services determines Georgia's current place in the global economy. In terms of GDP, the country is only 113th in the ranking. Georgia's treasury is estimated at $16.5 billion. At the same time, the average monthly income per capita varies within $300.

The main disadvantage of the country's financial structure is vulnerability to external factors. Tbilisi's economy is built on loans and investments. However, this is the only way the authorities can close the budget deficit.

Over the past 10 years, foreign aid to Georgia amounted to 3 billion euros. Currently, the total public debt exceeds $11 billion.