Georgia’s foreign direct investment (FDI) took a significant hit in 2023, plummeting by 30% to USD 1.3 billion. While reinvestments kept the numbers afloat, the lack of fresh equity capital signals trouble for long-term economic growth.
A Sharp Decline After Temporary Highs
After a temporary surge fueled by major one-off transactions — like the sales of Rustavi Azot and Georgian Water and Power in 2022-2023 — Georgia’s FDI has fallen back to earth. According to Galt & Taggart economist Lasha Kavtaradze, the drop was expected, but the scale is concerning.
In 2023, total FDI fell by 30%, landing at USD 1.3 billion. Much of the decline came from reductions in equity capital and reinvestment. The surge seen in previous years was more of an anomaly than a sign of sustained growth.
“Foreign investors are still here and reinvesting,” Kavtaradze noted. “But without fresh equity capital, Georgia’s economy can’t rely on past investments forever.”
Reinvestments Dominate — But at What Cost?
Reinvestments — profits made by existing foreign businesses that are plowed back into the country — accounted for a staggering 88% of total FDI in 2024. On the surface, that sounds like a good thing. It means investors believe in the market enough to keep their money here.
But there’s a catch: new investments are scarce.
- Equity capital, which brings in new projects and expansions, has seen a worrying decline.
- Without fresh capital inflows, Georgia risks becoming too dependent on existing businesses.
- The economy needs a balance of both reinvestments and new equity to ensure sustainable, long-term growth.
Kavtaradze stressed that Georgia must attract new investors to avoid stagnation. “Reinvestments keep things going for now, but they’re not enough to fuel future growth,” he added.
Sector Breakdown: Where the Money Still Flows
While the overall FDI picture looks bleak, some sectors are still attracting attention. Data from Georgia’s National Statistics Office shows a mixed landscape:
| Sector | FDI Change (2023) | Key Factors |
|---|---|---|
| Energy | +12% | Ongoing hydropower projects |
| Transport & Logistics | -18% | Slower infrastructure growth |
| Real Estate | -25% | Fewer large-scale developments |
| Financial Sector | +8% | Increased banking sector reinvestments |
The energy sector stands out as a rare bright spot, thanks to continued investment in renewable energy projects. But other key sectors — especially transport, real estate, and manufacturing — saw sharp declines.
Can Georgia Turn It Around?
The path forward isn’t easy. To reverse the downward trend, Georgia needs to rethink its approach to attracting foreign money. Economists point to several areas for improvement:
- Improved regulatory clarity: Investors want stability and predictability. Georgia’s evolving tax policies and legal framework have created uncertainty.
- Infrastructure upgrades: Modernizing transportation and logistics networks could make the country a more attractive investment hub.
- Diversification: Over-reliance on a few sectors makes the economy vulnerable. Encouraging investment in technology, manufacturing, and services could create a more balanced, resilient economy.
Kavtaradze remains cautiously optimistic. “Georgia has a lot to offer — strategic location, competitive labor costs, and strong trade ties. But without fresh investment, those advantages might not be enough.”
For now, the numbers tell a clear story: reinvestments are keeping the economy afloat, but without fresh foreign capital, the long-term outlook remains uncertain.
