doi.org/10.52340/eab.2025.17.03.03

Georgia’s geopolitical position between Russia, Turkey, and the European Union (EU) has long shaped its economic and political trajectory. Since regaining independence from the Soviet Union in 1991, the country has actively pursued economic modernization, integration with Western institutions, and infrastructure development. However, regional conflicts, shifting alliances, and global economic fluctuations continue to impact Georgia’s development.
The post-Soviet economic transition was characterized by structural reforms, privatization, and policy shifts aimed at establishing a market-driven economy. Georgia’s aspirations toward Euro-Atlantic integration, reflected in agreements such as the Deep and Comprehensive Free Trade Area (DCFTA) with the EU, have spurred economic reforms and expanded trade. Yet, geopolitical landscapes have posed significant challenges to economic stability and investor confidence.
Georgia’s strategic location between Europe and Asia plays a pivotal role in shaping its economic trajectory, providing opportunities for trade diversification, regional connectivity, and foreign investment. According to GeoStat, the country attracted approximately 1 333.8 million USD in foreign direct investment (FDI) in early 2024, underscoring both its appeal to investors and the volatility stemmed from geopolitical instability. This includes disruptions linked to the Russia-Ukraine war and ongoing regional tensions in Abkhazia and South Ossetia. Such instability, compounded by external dependencies, continues to undermine long-term economic resilience by discouraging sustained FDI flows and contributing to fiscal uncertainty.
To mitigate these risks, the analysis underscores the importance of comprehensive institutional reforms – enhancing governance, ensuring legal predictability, and strengthening anti-corruption efforts to foster a more favorable investment climate. It also advocates for accelerating digital transformation, positioning Georgia as a regional technology hub through innovation, expanded digital infrastructure, and increased investment in research and development. Drawing inspiration from Estonia’s e-governance model and Lithuania’s integration strategies, the document highlights how targeted public-private partnerships, regulatory clarity, and support for high-value sectors can boost economic competitiveness and adaptability.
Energy independence is regarded as a critical priority. The recommendation is to expand renewable energy sources – particularly hydropower, wind, and solar - to stimulate economic growth and reduce vulnerability to external shocks. Infrastructure modernization, including the development of deep-water ports and the expansion of regional transport corridors, is seen considered essential for strenthening Georgia’s role as a transit hub and deepening its integrating with global markets.
In summary, Georgia’s path to sustainable development hinges on coordinated reforms: diversifying trade and investment, accelerating digital and green transitions, reinforcing institutional capacity, and adopting adaptive strategies modeled on peer Baltic states. This integrated approach will bolster resilience to regional uncertainties and foster stable, inclusive economic growth.
Keywords: Geopolitical economy, economic sustainability, regional conflicts, institutional reforms, energy security, digital transformation.
JEL Codes: O10, O20, O30, O52, Q40

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