Political Uncertainty, Workforce Gaps Threaten Georgia’s Economic Momentum, EU Report Warns

TBILISI — Georgia’s steady economic growth faces mounting risks from political instability, acute workforce shortages, and structural inefficiencies, according to the EU Business Climate Report Georgia 2024, which warns that unresolved challenges could undermine the country’s EU integration ambitions and long-term business competitiveness.

Political Headwinds

The report, surveying 200 companies with European ties, reveals that 76.7% of firms view political instability as a top concern. Georgia’s EU accession process, stalled since June 2024 amid democratic reforms scrutiny, has collided with heightened uncertainty ahead of parliamentary elections later this year. Businesses cite delayed policy decisions, regulatory unpredictability, and perceived judicial inefficiencies as barriers to investment.

“Political stagnation is freezing strategic planning,” said one unnamed logistics sector executive in the report. “Without clarity on EU alignment, many are hesitating to commit capital.”

Workforce Crisis

A staggering 50% of companies report severe skills gaps, leading to operational underperformance of 5–40% and an estimated 26% annual GDP loss. High emigration and mismatched education programs have left critical sectors like manufacturing and IT struggling to fill roles. Despite this, firms investing in internal training saw measurable returns, underscoring workforce development as a resilience lever.

“We’re losing talent to Europe and neighboring markets daily,” said Nino Chkheidze, CEO of a Tbilisi-based tech startup. “Training helps, but without systemic education reforms, we’re plugging holes in a sinking ship.”

Trade and Structural Challenges

While the EU remains Georgia’s largest trade partner, exports to the bloc fell 18% in 2023, attributed to costly compliance with EU standards, lack of accredited certification labs, and poor regulatory understanding. Currency volatility further complicates financial forecasting, with 63% of firms citing exchange rate swings as a major hurdle.

Persistent corruption and opaque public procurement processes exacerbate frustrations. “Bidding for contracts feels like a lottery,” remarked a construction firm manager. “The rules change depending on who you know.”

Path to Resilience

The EU report urges accelerated judicial reforms, modernization of vocational training, and streamlined EU compliance mechanisms to unlock growth. It highlights that businesses investing in workforce upskilling recouped costs within 12–18 months, suggesting targeted policies could mitigate GDP losses.

Georgia’s Economy Ministry acknowledged the findings, pledging to “prioritize public-private dialogues” ahead of elections. However, analysts caution that political brinkmanship over EU demands could delay progress.

“Growth is fragile without trust in institutions,” said EU Ambassador Carl Hartzell. “Georgia’s aspirations hinge on aligning reforms with EU benchmarks—not just politically, but economically.”