IMF: Georgia’s economy shows resilience despite geopolitical uncertainty and higher energy prices

Georgia’s economic performance remains strong despite rising geopolitical uncertainty and higher energy prices, while the country’s fiscal and external buffers have strengthened further, according to the International Monetary Fund (IMF).

The assessment was issued following an IMF mission to Georgia, led by Alejandro Haidenberg, which held meetings in Tbilisi from November 9 to 13 to review recent economic and financial developments, as well as progress on reform priorities.

According to the mission, Georgia’s economy continued to expand at a robust pace, with real GDP growing by 7.4% in January-September 2026. Information and communication technology, transport and trade remained the main drivers of economic activity, although growth moderated in recent months. The IMF noted that the ongoing conflict in the Middle East had so far had only a limited impact on overall economic activity and tourism revenues, although visitor numbers from countries directly affected by the conflict had declined.

Following growth of 7.5% in 2025, the IMF projects Georgia’s economy to expand by 7.2% in 2026 and 5.7% in 2027, gradually converging towards its estimated medium-term potential growth rate of 5%.

The mission also highlighted inflationary pressures. Annual inflation reached 5.9% in October 2026, exceeding the National Bank of Georgia’s 3% target, while core inflation stood at 4%. The IMF identified higher energy prices resulting from the conflict in the Middle East as the main driver of inflation, noting that price pressures had become more widespread. Although inflation is expected to ease as the impact of higher energy prices fades, it is likely to remain above the central bank’s target in the near term.

The National Bank raised its policy rate to 8.25% in May and has maintained it at that level. The IMF said further monetary tightening could be necessary if inflation proves more persistent than expected.

Georgia’s external position has strengthened considerably. The current account deficit narrowed to 2.5% of GDP in the first half of 2026, supported by strong exports of IT services and slower growth in overall imports. International reserves also increased significantly, reaching USD 8.2 billion at the end of October.

The IMF welcomed the National Bank’s continued foreign currency purchases, noting that reserve accumulation would strengthen resilience to external shocks, support market confidence and preserve exchange-rate flexibility.

However, the mission warned that uncertainty surrounding the economic outlook remains high. Further escalation of the conflict in the Middle East could drive up energy and food prices and negatively affect tourism. Domestic political tensions and strained relations with the European Union could also weigh on investor sentiment. At the same time, an end to the war in Ukraine could improve regional stability, confidence and trade prospects, although it could also reverse some of the migration and financial inflows that have supported Georgia’s growth in recent years. Increased investment, including in major real estate projects, could provide additional momentum to economic activity.

The IMF described Georgia’s fiscal policy as prudent. The budget deficit is expected to stand at around 1.5% of GDP in 2026, while public debt is projected to decline to 33% of GDP. The lower-than-budgeted deficit reflects stronger revenues and delays in the execution of capital spending, a trend also observed in 2025.

The 2027 draft budget envisages a deficit of 2.5% of GDP, alongside increased social spending, public sector salaries and capital investment. The mission said improvements in procurement contracts and project readiness could facilitate the more timely implementation of capital expenditure, although execution risks remain. It also recommended that measures to address higher energy prices be targeted at vulnerable households, avoiding broad interventions that could increase fiscal costs or distort market price signals.

The financial sector remains sound, with banks maintaining high levels of capitalisation, profitability and liquidity, while non-performing loans remain low. Nevertheless, dollarisation continues to be a significant source of financial vulnerability, and the recent increase in foreign-currency lending, including mortgage loans, warrants attention. The IMF also noted progress by the National Bank in developing a regulatory and supervisory framework for virtual assets, stressing the need for effective oversight and safeguards against money laundering, terrorist financing and sanctions evasion.

The mission further noted that strong economic growth in recent years had been accompanied by improvements in labour market indicators. However, employment remains low compared with peer countries, and many workers have yet to benefit from opportunities in more productive sectors. The IMF said reducing skills mismatches and improving vocational education and employment services would help expand access to better jobs. Reforms aimed at boosting productivity, developing human capital and encouraging productive private-sector investment would also support more inclusive growth.

The IMF welcomed recent amendments to the Law on the National Bank, saying they introduce greater collegiality in monetary policy decision-making, strengthen rotation arrangements for members of the central bank’s Governing Board and improve qualification requirements.

The mission also welcomed the authorities’ intention to introduce a collegial decision-making model for the Financial Stability Committee. It called for measures to ensure that non-executive members continue to hold a majority on the National Bank’s Governing Board, in line with previous recommendations.

The mission also acknowledged progress in monitoring and overseeing state-owned enterprises. It said the recently adopted action plan for state-owned enterprises provides a basis for further reforms, while stressing the importance of effective implementation and additional measures to improve corporate governance and accountability. The Georgian Development Corporation, the IMF added, should address market gaps in access to finance without crowding out private investment or creating fiscal risks.

The IMF mission thanked the Georgian authorities and other partners for their hospitality and constructive discussions. During the visit, it met with National Bank Governor Natia Turnava, Finance Minister Lasha Khutsishvili, Vice Prime Minister and Minister of Economy and Sustainable Development Mariam Kvrivishvili, as well as other senior officials and representatives of the private sector, civil society and development partners.

The IMF’s 2026 Article IV consultation with Georgia is scheduled for April 2027.