NCPA - National Center for Policy Analysis

Georgia's Economic Renaissance

March 22, 2012

The country of Georgia broadly and the city of Batumi specifically seem to be riding a governmental and economic renaissance.  The country is among the most rapidly improving nations in the world in a number of governmental indicators, and the policies of the country's president have created the potential for unprecedented prosperity, says Richard W. Rahn, a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

Georgia was only able to regain its independence from the Soviet Union (of which it had been a part since 1921) in 1991.  Thus, it has had only 20 years in which to establish its own institutions and grapple with the challenges of full autonomy.  Nevertheless, its progress is astounding.

  • In the World Bank's 2012 Doing Business report on the "ease of doing business," Georgia ranks 16 of 183 countries.
  • In that same report, it ranks first among the 24 countries in the Eastern European and Central Asian region.
  • Georgia ranks 27 of the 141 countries in the Fraser/Cato Economic Freedom of the World Index, by far the highest ranking in the region.
  • Contributing to this improvement is Georgia's rankings in business regulation and size of government: 7th and 15th, respectively.
  • Additionally, the current administration has made great strides in fighting corruption: in Transparency International's Global Corruption Barometer 2010, Georgia easily ranks first out of 86 countries included.

Crucial to this impressive success are the broad attempts to deregulate a previously captive economy and simplify the tax structure.  These reforms have not only improved the effectiveness of the country's government, but have also produced vast economic gains.

  • The Georgians have moved to a 20 percent flat-rate personal income tax system and a 15 percent corporate tax rate.
  • Georgia has a debt-to-gross domestic product ratio that is a very manageable 38 percent -- half that of the United States, the United Kingdom and France.
  • Except for the period right after the Russian invasion in 2008, Georgia has enjoyed a high rate of economic growth as a result of the reforms, with an expected growth rate of 7 percent this year.

Source: Richard W. Rahn, "Batumi 'Miracle,'" Washington Times, March 19, 2012.

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