Georgia’s business confidence has dropped significantly in the first quarter of 2025, according to the latest report from the International School of Economics at Tbilisi State University (ISET). The report reveals that the business confidence index fell by 8.8 points, reaching a negative value of -5.0, a trend driven by poor performance and pessimistic projections across key sectors, especially in services and agriculture.
Dramatic Decline in Services Sector
The most notable drop came from the services sector, where business confidence plummeted by 21.5 points. This represents the sharpest decline among all industries surveyed and underscores ongoing struggles within the service industry, which has faced increasing challenges over the past year.
The service sector’s decline, largely tied to weak demand and lower consumer spending, has left many businesses struggling to maintain profitability. With service providers facing these difficulties, expectations for recovery in the near future are tempered, adding to the overall drop in business confidence.
Agriculture Faces Stark Decline in Both Performance and Expectations
Agriculture, which has historically been a strong sector for Georgia, saw an even sharper drop, particularly in its performance index. Falling by 22.4 points to a negative value of -18.6, agriculture experienced one of its worst quarters in recent memory, with confidence in the sector sliding to -50.0. This sharp decline reflects an ongoing struggle in farming, exacerbated by unpredictable weather conditions and a lack of resources for modernization.
Equally concerning were the expectations for the sector, which dropped to -9.9. With farmers facing a range of difficulties from labor shortages to high operational costs, the outlook remains grim for the agricultural industry in the immediate future.
Sales Price Expectations on the Rise
Despite the overall decline in confidence, one area showing growth is sales price expectations. The index for anticipated price increases rose by 6.9 points, reaching a positive value of 20.0. This increase suggests that businesses are expecting to raise prices in response to inflationary pressures, supply chain difficulties, and a generally tough economic environment.
While businesses may feel the need to increase prices, this could further strain consumer purchasing power, contributing to the overall sense of unease in the market.
Challenges for Large Companies and SMEs
Both large corporations and small to medium-sized enterprises (SMEs) are facing distinct but serious challenges. Large companies are particularly struggling with a lack of qualified workers, and in some cases, they are also encountering unspecified challenges that impact their operations.
Meanwhile, SMEs are grappling with reduced demand for their products and services, compounded by a shortage of skilled labor. For these smaller businesses, the ongoing challenges highlight the pressing need for a better-trained workforce and more stable market conditions to ensure long-term survival.
