10.36172/EKONOMISTI.2024.XX.04.TOKMAZISHVILI.LOMINASHVILI

Expanded Symmary 

The article examines the challenges to Georgias economic security, addressing political, economic, and regional issues. It highlights the unstable trajectories and complex geopolitical developments in the South Caucasus, emphasizing the influence of regional economic actors on Georgia's economy. The article also outlines potential directions for economic development, noting that, for the first time in Georgia's history, domestic political decisions have significantly shaped its economic trajectory. Anticipated economic shifts in Georgia are expected to unfold amid escalating tensions between nations and regional organizations. The so-called "Cold War" with the West, coupled with a pivot in trade and investment policy toward Northeastern nations, threatens Georgia's European aspirations.

Following the August 2008 war between Russia and Georgia and the occupation of Georgian territories, the confrontation between Georgian and Russian interests became overt. While tensions eased somewhat after 2012, significant geopolitical initiatives and projects in Georgia aimed at fostering greater independence and economic stability likely conflicted with Russia's strategic interests. The article identifies several factors influencing economic security: Currently, there are zones of heightened militarization by Russia in Georgia, specifically in Abkhazia and the so-called South Ossetia/Tskhinvali region. Due to the regions' weak economic development, financial support from Russia is crucial for the local population. These funds are allocated for socio-economic programs, pensions, and defense. In both Abkhazia and the South Ossetia/Tskhinvali region, Russian defense spending far exceeds the total budget and even the GDP of these areas, reinforcing the predominantly military character of the region.

It is noted that Russias private and state finances are strengthening alongside its military presence, increasingly dominating Georgias economy. Following the onset of the war in Ukraine, several thousand Russian companies were registered in Georgia, and financial flows from Russia to Georgia surged due to sanctions on transactions between Russia and the West and the exclusion of Russian banks from the international financial system. The influx of foreign companies and capital significantly contributed to Georgia's GDP growth, exceeding 10% in 2022-2023. However, this growth is considered short-lived, as such short-term economic boosts during conflicts often lead to sharp financial market fluctuations, increased borrowing costs, and slowed economic growth. Macroeconomic trends are expected to worsen further, exacerbated by declining capital inflows from Western countries amid deteriorating political relations.

Currently, Russia is Georgias primary trade partner, with growing dependence on Russian imports, particularly wheat, flour, and energy resources. This dependence poses risks of inflationary pressure. Control over oil, gas, and grain provides Moscow with leverage in the region, increasing its influence over Georgia.

The article highlights that Chinas growing interests in Georgia, including preferential lending for social and infrastructure projects, and Georgia's strategic focus on China, conflict with the interests of the European Union and the United States. This misalignment poses a long-term threat to Georgia's aspirations for a European future. It emphasizes that Georgias economic stability relies heavily on the development of a robust transport and economic corridor, which is vital for enhancing national and regional economic security. However, China's increasing control over a critical global trade route and its expanding investment footprint are likely to strain Georgia's current account balance, potentially undermining financial stability. These and other challenges weaken Georgia's geoeconomic advantages and pose risks to its long-term growth and integration into the European economic framework. 

Keywords: economy of Georgia, economic security, geopolitics, South Caucasus region,