The breakup of the Soviet Union severely dislocated the economy of Georgia by disrupting established trade patterns. Three separate armed conflicts and several years of political instability created even more serious damage. The country’s gross domestic product (GDP), which measures the total value of goods and services produced, declined between 1990 and 1995 by the greatest amount of any former Soviet republic. Georgia became increasingly dependent upon foreign financial and humanitarian aid. But beginning in the mid-1990s, increasing political stability allowed Georgia to make significant progress toward renewing economic growth. Several attributes brighten Georgia’s long-term economic prospects. The country’s warm climate and position on the eastern shore of the Black Sea make the country suitable for agricultural and tourism development. It also straddles the best transportation routes across the Caucasus Mountains. Abundant rivers flowing from the mountains provide water for crop irrigation and hydroelectric production.
The interior of Georgia has coal deposits (notably at Tqvarch'eli and Tqibuli), petroleum (at Kazeti), and a variety of other resources ranging from peat to marble. The manganese deposits of Chiat'ura rival those of India, Brazil, and Ghana in quantity and quality. Its waterpower resources are also considerable. The deepest and most powerful rivers for hydroelectric purposes are the Rioni and its tributaries, the Inguri, Kodori, and Bzyb. Such western rivers account for three-fourths of the total capacity, with the eastern Kura, Aragvi, Alazani, and Khrami accounting for the rest. Oil deposits have been located near Bat'umi and Pot'i under the Black Sea.
Georgia's economy has traditionally revolved around Black Sea tourism; cultivation of citrus fruits, tea, and grapes; mining of manganese and copper; and output of a small industrial sector producing wine, metals, machinery, chemicals, and textiles. The country imports the bulk of its energy needs, including natural gas and oil products. Its only sizable internal energy resource is hydropower. Despite the severe damage the economy has suffered due to civil strife, Georgia, with the help of the IMF and World Bank, has made substantial economic gains since 1995, increasing GDP growth and slashing inflation. The Georgian economy continues to experience large budget deficits due to a failure to collect tax revenues. Georgia also still suffers from energy shortages; it privatized the distribution network in 1998, and deliveries are steadily improving. The country is pinning its hopes for long-term recovery on the development of an international transportation corridor through the key Black Sea ports of P'ot'i and Bat'umi. The growing trade deficit, continuing problems with tax evasion and corruption, and political uncertainties cloud the short-term economic picture.
