Georgia officials seeking to minimize economic concerns amid demonstrations

Georgia officials seeking to minimize economic concerns amid demonstrations

Georgia's Economic Resilience Amid Intensifying Political Crisis

In a bid to project normalcy amid a deteriorating political crisis, Georgian authorities are advocating for business as usual in the country's economy. However, the economy is showing signs of strain as markets respond adversely to the government's reliance on strong-arm tactics to contain protests.

The political landscape took a turn for the worse on November 28, with a sudden government announcement halting EU accession talks until at least 2028. The decision caused widespread outrage, leading to protests across the nation. Since then, key economic indicators have shifted negatively.

Shares of the nation's two largest banks, TBC and Bank of Georgia, have continued to fall a week after the announcement. The Georgian lari has also weakened significantly, with Bloomberg reporting on December 5 that the currency reached its lowest point against the US dollar in two years.

Prime Minister Irakli Kobakhidze sought to assuage concerns during a December 3 briefing, asserting Georgia's economic growth and dismissing fears of market destabilization due to the ongoing political crisis. He even claimed that protesters were attempting to sow economic chaos without providing evidence.

On December 5, Kobakhidze again attempted to reassure the business community, insisting that any setbacks were temporary and that the country's peaceful and stable development would continue. He suggested that previous bouts of uncertainty, such as protests earlier in 2024 linked to the government's adoption of the so-called 'foreign agents' law, had merely prompted short-term fluctuations in the economy.

The current wave of protests appears more intense than past episodes of unrest. Many protesters believe the country's geopolitical future is at stake, with the government seemingly leaning towards realigning with Russia and adopting an autocratic governing style championed by countries like Hungary, while the populace overwhelmingly favors a Western future.

The intensifying nature of the crisis has led some government officials to resign, and some business entities have expressed concern about the country's direction. On November 30, the Bank of Georgia appeared to align itself with the protest movement, stating that "for the Bank of Georgia, whose name bears a special burden, there is no alternative to the country's road towards Euro-integration."

Back in May, during protests against the 'foreign agents' law, the national bank was forced to sell millions in reserve currency to ensure fiscal stability. Some observers worry that the central bank now lacks the resources to manage a prolonged period of uncertainty.

Speaking in parliament on December 5, the director of the National Bank of Georgia, Natia Turnava, claimed that central bankers had "all necessary tools" to intervene and stabilize currency markets, if needed.

Georgia's economy has shown impressive resilience in recent years, with growth exceeding 10% in 2021 and sustained robust performance through 2022 and 2023. The economy continued to expand into early 2025, with Q1 year-on-year growth averaging 9.3%. Despite these strong macroeconomic indicators, the political environment has grown increasingly volatile. Recent events—such as the arrest of opposition figures, mass detentions of protesters, and the introduction of controversial laws—have prompted credit rating agencies to place Georgia on negative watch. Concerns center on "political instability" and "erosion of democratic institutions," which are perceived as heightened risks for investors.

If the political crisis persists, potential long-term effects on investor confidence and access to foreign capital could impact the Georgian lari and the economy as a whole. The European Commission forecasts a moderate slowdown in growth to 5–6% in 2025–2026, reflective of increasing headwinds from both external and internal political factors.

1. The Georgian authorities are advocating for business as usual in the country's economy amid a deteriorating political crisis, but the economy is showing signs of strain due to markets' adverse responses to the government's tactics.
2. The political crisis, intensified by the government's decision to halt EU accession talks, has led to negative shifts in key economic indicators, such as declining shares of the two largest banks and a weakened Georgian lari.
3. The Prime Minister, Irakli Kobakhidze, has sought to reassure the business community, claiming that any setbacks in the economy due to the crisis are temporary and that the country's peaceful and stable development will continue.
4. The European Commission forecasts a moderate slowdown in Georgia's growth to 5–6% in 2025–2026, due to increasing headwinds from both external and internal political factors, signaling potential long-term effects on investor confidence and access to foreign capital.

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