Accessibility links

Helping Georgia's Bruised Economy


Not so long ago, Georgia was arguably the economic tiger of the Caucasus. Due to the country's well-educated but relatively inexpensive workforce, pro-business government, 12 percent annual growth rate, and high ranking by the World Bank for ease of doing business, foreign investment grew by leaps and bounds, doubling to $2.1 billion in the previous year alone.

Then came the twin disasters of the conflict with Russia in early August and the global economic crisis soon after. The Georgian government immediately launched post-conflict recovery activities, but, according to the Georgian Foundation of Strategic and International Studies, the conflict cost the Georgian economy about $1.2 billion.

This figure includes damage to infrastructure, agriculture and housing, social needs of internally displaced persons, pullouts of bank deposits by investors, withdrawals of credits, environmental damage sustained through oil spills in the Black Sea, and forest fires, among others. Considering that Georgia's 2007 Gross Domestic Product was $9.8 billion, this is a tremendous amount of money.

According to the Joint Needs Assessment for Georgia, conducted as a joint mission by the United Nations, the World Bank, the European Commission, and other regional multilateral development banks, to succeed, Georgia must have rapid foreign financial support to buttress its own efforts.

The United States has pledged one billion dollars in non-military aid for the reconstruction of Georgia. So far, the U.S. has sent $60 million in humanitarian assistance, and another $250 million in budget support to maintain the health care system, help internally displaced persons, and finance schools. The Millennium Challenge Corporation increased Georgia's compact by $100 million, for rehabilitation of roads, water supply and waste projects, and for repairs to its gas pipeline. And the U.S. Overseas Private Investment Corporation will deliver $176 million to help make mortgages available to the people of Georgia, and to support residential and commercial property development.

The rest of the money is destined for other high-priority projects identified through consultation with the Georgian government, civil society, and other donors. The balance of the U.S. commitment will need to be requested by the next U.S. Administration and appropriated by the next Congress in the new year.

The conflict with Russia and the weak global economy have shaken the key pillars of Georgia's economic growth. But the United States will help the economic tiger of the Caucasus roar again.
XS
SM
MD
LG