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Georgia is located in the Southern Caucasus region, at the crossroads of Western Asia and Eastern Europe. It is bounded on the west by the Black Sea, on the north by Russia, on the south by Turkey and Armenia, and on the southeast by Azerbaijan. Situated on the shortest route between Europe and Asia, Georgia’s transport system is a key link in the historic Silk Road trade network. The capital and largest city is Tbilisi, and the country covers a territory of 69 700 square kilometres (km2) with a population of 3.7 million. Georgia is a unitary, semi-presidential republic, with the government elected through a representative democracy.
Georgia’s overall economic policy has been focused on creating a liberalised economic environment through minimal state interference, deregulation, privatisation, reduced and simplified licensing and taxation, and free trade. Georgia has pursued westward-leaning political, economic and foreign policies, and signed an Association Agreement, including assent to the Deep and Comprehensive Free Trade Area (DCFTA), with the European Union in June 2014. The Association Agreement was ratified by the European Parliament in December 2014, and in October 2016 the Georgian Ministry of Energy signed an Accession Protocol to the Energy Community Treaty, which was ratified by the parliament in April 2017. The next step is implementation of reforms.
Robust economic growth of 6% per year on average was achieved between 2003 and 2015, following structural reforms that stimulated capital inflows and investment. The reforms improved the business environment, strengthened public finances, upgraded infrastructure facilities and liberalised trade.
Growth was also supported by increased foreign direct investment (FDI), and was driven by capital accumulation and sound use of excess capacity rather than by net job creation, with productivity gains concentrated mainly in the non-tradeable sectors. Gross domestic product (GDP) per capita (in current prices) increased from USD 920 in 2003 to USD 3 767 in 2015.
The World Bank projects that greater policy certainty following the 2016 elections, a modest recovery in external markets and strong FDI inflows will boost the GDP growth rate to 5% in 2017-18
Georgia has a developed, stable and reliable energy sector that has been largely unbundled since the mid-1990s; its primary domestic energy sources are hydropower and fuelwood. The government is focused on securing private investment to construct new hydropower stations and diversify fossil fuel supply sources and routes, but further efforts are required to improve efficiency in domestic energy use and to capitalise on the country’s ample renewable energy potential.
Georgia has been a signatory to the Energy Charter Treaty since 1995 and a member of the World Trade Organization since 2000, and is becoming a Party to the Energy Community Treaty following ratification of the Accession Protocol in 2017.
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