Georgia’s economy grew by 6.6% y/y in Aug-25
In Aug-25, Georgia’s economy grew by 6.6% y/y, after a 6.5% y/y growth posted in previous month. Cumulatively, real GDP increased by 7.9% y/y in 8M25. August’s growth was supported by persistent activity in ICT, as well as financial & insurance, professional & scientific, energy and trade sectors, while construction and manufacturing contracted. We forecast real GDP growth at 7.5% in 2025 and at 6.0% in 2026 (see latest macro forecasts here).
Annual inflation at 4.8% in Sep-25
In September 2025, Georgia’s annual inflation reached 4.8%, up from 4.6% in August. The main contribution came from domestic inflation, which increased by 6.3% y/y (Aug: 6.6%), followed by mixed-goods inflation, which accelerated to 7.8% y/y (Aug: 6.3%). In contrast, imported goods prices declined further by 1.1% y/y. Meanwhile, core inflation, excluding food, energy, and tobacco, eased to 2.1% y/y in Sep-25, down from 2.8% posted in previous month.
By categories, annual inflation in Sep-25 was largely driven by price increases in food and non-alcoholic beverages (+11.9% y/y, +3.89ppts), healthcare (+9.0% y/y, +0.76ppts), alcoholic beverages & tobacco (+4.1% y/y, +0.26ppts) and hotels & restaurants (+7.1% y/y, +0.23ppts) categories. Meanwhile, deflation was recorded in transport (-2.1% y/y, -0.26ppts), furnishings, household equipment & maintenance (-3.7% y/y, -0.21ppts), communication (-4.2% y/y, -0.14ppts) and clothing & footwear (-2.0% y/y, -0.13ppts).
We forecast average annual inflation at 3.7% in 2025 and 2.9% in 2026.
CA deficit was 3.0% of GDP in 2Q25
The Current Account (CA) deficit narrowed markedly to 3.0% of GDP in 2Q25, bringing the 1H25 CA deficit to 5.3% of GDP, down from 7.0% in 1H24. This improvement was mainly driven by stronger service inflows: the services surplus rose by 17.1% y/y to US$ 1.9bn, supported by robust growth in ICT exports (+43.8% y/y to US$ 560mn), followed by moderate gains in tourism (+3.8% y/y to US$ 2.0bn) and transport (+4.6% y/y to US$ 827mn). On the other hand, the merchandise trade deficit – the largest source of external imbalance – widened slightly by 0.5% y/y to US$ 3.4bn, as exports increased by 13.7% y/y and imports were up by 7.5% y/y). Notably, net FDI remained the dominant source of financing, covering 65.3% of the CA deficit in 1H25.
We forecast CA deficit at 5.0% of GDP in 2025, down from 5.4% posted in 2024.
Government targets a 2.5% deficit in the 2026 draft budget
The government has submitted an initial draft of the 2026 state budget to Parliament, targeting 5.0% economic growth and a 4.0% GDP deflator for 2026. Similar to 2025, the fiscal deficit is planned at 2.5% of GDP for 2026 at the consolidated level. Notably, tax revenues are expected to increase by 5.9% y/y, reaching 24.2% of GDP, while privatization revenues are set at GEL 350mn. Total expenditures for 2026 are budgeted at 29.4% of GDP, with capex accounting for 6.9% of GDP, down from the 7.9% in 2025E. Total public debt to GDP is projected at 34.9% (2025E 35.9%), reflecting reduced share of external debt (2026F 23.0% of GDP vs. 2025E 24.5%) and an increased share of domestic debt (2026F 11.9% of GDP vs. 2025E 11.4%).
