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Journal number 1 ∘ Emir Eteria
EU-Georgia Economic Relations during 2014-2023: From Association to Candidacy


Expanded Summary

On December 14, 2023, according to the conclusions of the European Council, Georgia was granted EU candidate status, which marks the beginning of a new phase in EU-Georgia relations. Therefore, it is important to analyze and assess the economic relations from the moment of signing the EU-Georgia Association Agreement (2014) until Georgia was granted candidate status. It is obvious that the Association Agreement, including the Deep and Comprehensive Free Trade Agreement (DCFTA), represents an important mechanism for intensifying Georgia's economic relations with the EU and, consequently, increasing the degree of Georgia's economic integration with the EU. Any country, including Georgia, enters the process of regional economic integration to increase trade, especially exports, to attract Foreign Direct Investment (FDI) and to support economic growth and development in general. These are the economic determinants of economic integration. Obviously, economic integration has never been a process determined by economic factors alone. Other factors such as historical, social, political have a huge impact on economic integration. However, this article focuses on the economic determinants of regional economic integration.

In order to assess and determine the degree of economic integration achieved between the EU and Georgia in the period 2014-2023, two indicators of regional economic integration were analyzed. The first indicator is trade integration and the second is capital integration. In order to assess these two main indicators of economic integration, relevant statistics on trade and Foreign Direct Investment for the period 2014-2023 were analyzed. Obviously, the process of regional economic integration is not limited to trade and capital integration. However, these two forms of regional economic integration represent the most important forms of any successful economic integration and are the basis for the development of other forms of economic integration, such as institutional integration, sectoral integration, market integration, policy integration, social integration, etc. These forms of economic integration represent forms of advanced regional economic integration, which cannot be achieved without progress in trade and capital integration.

In the period 2014-2023, based on the implementation of the Association Agreement, including the DCFTA, the economic relations between the EU and Georgia have gained new dynamism. As the analysis of relevant trade data has shown, two trade integration variables, such as absolute and average annual growth rate of export-import with the EU, have positive dynamics, while the other two variables, the share of exports to the EU in Georgia's total exports and the share of the EU in Georgia's trade turnover, have negative dynamics. Thus, Georgia's trade integration with the EU has not changed significantly in the period 2014-2023. As for capital integration, the analysis of data on EU Foreign Direct Investments in Georgia shows positive dynamics both in terms of absolute growth and average annual growth rate. Obviously, assessing the level of regional economic integration between Georgia and the EU based on only two indicators - trade and capital integration - gives an imperfect impression on the integration process. However, without a high degree of integration in these forms, successful regional economic integration is impossible. Taking all the above into account, the degree of Georgia's economic integration with the EU in the period 2014-2023 does not illustrate irreversible upward trends. A precondition for increasing the level of Georgia's economic integration with the EU is, along with trade and capital integration, the development of other forms of integration, such as institutional, sectoral, market, political and social integration, which, in turn, will ensure increased compatibility of Georgia's economy with the EU economy and, consequently, a higher level of economic integration with the EU.

Keywords: Georgia; EU; Association Agreement; Trade Integration; Capital Integration