Georgia is a pivotal country in cross-border transport corridors

2026-05-04

Business Insider Georgia has recorded an exclusive interview with the Director of the Asian Development Bank’s Country Office in Georgia. In the interview, Leslie Bearman Lam talks about Georgia’s macroeconomic environment, ADB’s priority sectors in the country’s context, the investment environment and competitiveness, the monetary policy of the National Bank of Georgia (NBG), Georgia’s role in regional connectivity and cross-border infrastructure corridors, Georgia’s energy security and potential in this direction, the effectiveness of the Asian Development Bank’s (ADB) cooperation with the Georgian government, structural reforms, and current and future economic prospects.

How does ADB assess Georgia’s current macroeconomic environment and growth prospects for 2025–2026? From ADB’s perspective, what is Georgia’s long-term economic potential?

The Georgian economy has shown resilience to global shocks, driven by prudent macroeconomic policies and solid fundamentals. Economic growth remained robust at 7.5% in 2025, but is expected to decline to 5.5% in 2026 and 5.2% in 2027, reflecting weakening domestic and external demand.

At the same time, the outlook is becoming more complex. External risks remain elevated, particularly in light of Russia’s ongoing war in Ukraine and the ongoing conflict in the Middle East. These developments could weigh on global economic activity, disrupt trade and supply chains, and contribute to rising inflationary pressures, which would have significant implications for a small and open economy like Georgia.

Overall, Georgia’s long-term economic growth potential is solid, provided that the reform momentum is sustained, infrastructure gaps are addressed, and external risks are carefully managed. The country’s strategic geographic location creates opportunities to strengthen its role as a regional transit and trade gateway. A long-term commitment to regional integration and connectivity will help diversify trade and strengthen economic resilience.

What are ADB’s priority sectors in Georgia for the coming year—transport, energy, municipal services, digitalization, infrastructure, or private sector development?

ADB’s priority sectors in Georgia are defined in ADB’s Country Engagement Strategy 2024–2028, which was developed through in-depth consultations with the Georgian government, development partners, the private sector, civil society, and academia. Next year, our focus will continue to be on a number of high-impact sectors where ADB can deliver the strongest development outcomes. This includes continuing to upgrade Georgia’s strategic transport infrastructure—strengthening Georgia’s role as a regional transport and logistics hub, particularly under the Central Asia Regional Economic Cooperation (CAREC) Corridor II, which largely overlaps with the Middle Corridor. It also aims to expand multimodal transport and logistics connectivity through better road links to ports, rail networks, and logistics facilities, which will facilitate regional cooperation and integration.

In addition, ADB is working to increase the potential for clean energy production and exports, and to develop domestic value creation, particularly in agriculture and tourism. It is encouraging the private sector to play a greater role in accelerating economic growth through low-carbon manufacturing.

How does ADB assess Georgia’s investment climate and competitiveness compared to regional countries?

Georgia’s investment climate is relatively favorable in the region, influenced by a liberal economic framework, open trade policies, and a generally business-friendly regulatory environment. These factors have helped attract investment and strengthen private sector activity.

However, a number of significant challenges remain. Structural constraints — including limited access to finance, especially outside Tbilisi, skills mismatches and labor market gaps — continue to hamper competitiveness. Institutional capacity, capital market development, and productivity levels need further strengthening. In addition, the stalled progress in the EU accession process, as well as the EU’s signals, could create uncertainty, potentially weighing on export performance and investor sentiment. Compared to regional countries, Georgia is well positioned in terms of regulatory simplicity and economic openness. However, addressing these structural challenges in a consistent manner will be key to maintaining and enhancing competitiveness in the long term.

What is ADB’s assessment of Georgia’s fiscal framework and public debt sustainability?

Georgia’s fiscal framework is prudent and credible, and recent developments reflect continued fiscal discipline and sound public finance management. The fiscal deficit narrowed to 1.2 percent of GDP in 2025, driven by strong revenue mobilization and more moderate expenditure growth. At the same time, public debt declined to below 35 percent of GDP, well below the widely used prudential benchmark.

Georgia’s continued access to international capital markets, including the successful refinancing of Eurobonds amid high investor interest and favorable pricing, further underscores confidence in the country’s macroeconomic management and fiscal credibility.

In addition, maintaining fiscal discipline will remain important given the high level of external uncertainties. Close monitoring of fiscal risks — particularly related to state-owned enterprises, public-private partnerships, and exchange rate risks in public debt — will be necessary to maintain debt sustainability and limit potential pressures on public finances.

How do you assess the monetary and regulatory policy of the National Bank of Georgia in the current environment?

The monetary and regulatory policy of the National Bank of Georgia is assessed as solid and consistent in the current environment. Downside risks remain high, in particular due to Georgia’s vulnerability to global and regional shocks, persistent external price pressures, and high levels of dollarization. In response to increased inflation risks, including pressures from rising global oil prices, the monetary policy rate is maintained at a relatively tight level of 8%. In addition, the National Bank has clearly stated its readiness to further tighten policy if inflationary pressures intensify or inflation expectations become less convincing.

At the same time, the accumulation of foreign exchange reserves has strengthened the economy’s buffers against external shocks. As of February 2026, total international reserves reached a record high of approximately $6.65 trillion, exceeding the widely used adequacy criterion. This is particularly important given the high dollarization of the economy and its sensitivity to external shocks.

In terms of the financial sector, the banking sector remains resilient. The effective dedollarization and macroprudential measures implemented by the National Bank of Georgia have contributed to the reduction of currency-related credit risks and excessive debt. At the same time, the system has been strengthened by the implementation of a deposit insurance mechanism and the creation of a resolution fund, which increases the stability and crisis management capabilities of the banking sector. Strong capital adequacy, high profitability, and low levels of problem loans reflect the solid fundamentals of the financial sector.

How does ADB see Georgia’s role in regional connectivity and cross-border infrastructure corridors?

Georgia is a key country in regional connectivity and cross-border transport corridors, particularly along the Karek II Corridor and the Middle Corridor, which connect Central Asia, the South Caucasus, and Europe. Georgia provides a gateway for goods between and beyond the Black and Caspian Sea regions, and is also an important logistics hub, where improved roads, ports, railways, and border infrastructure create local added value through transport services, trade, tourism, and employment.

ADB’s investments in East-West highway corridors, including sections linked to international trade routes, directly support this role. Projects such as the Batumi Bypass and other strategic road sections are reducing traffic congestion, increasing safety, and shortening freight transit times. At the policy level, ADB is also supporting reforms aimed at improving transport efficiency, strengthening customs coordination, and cross-border logistics—critical to building tangible infrastructure linkages.

Georgia can benefit from diversified trade routes, especially as global supply chains strive for sustainability. Continued development of multimodal transport—the effective integration of roads with ports and railways—will be essential for Georgia to fully seize this opportunity.

How does ADB assess progress in modernizing Georgia’s transport sector?

Over the past decade, Georgia has made significant progress in upgrading its road infrastructure, including improving design standards, enhancing road safety, and integrating climate-smart approaches into projects. With the joint support of ADB and our international financial partners, the Government of Georgia recently completed the Rikoti section of the East-West Highway—one of the country’s most important transport arteries. In addition, upgrades are underway on key transport corridors, including the construction of the new Batumi-Sarpi road, as well as previously implemented bypass projects—the Kobuleti and Batumi bypasses—which together strengthen Georgia’s role in the second Karek corridor and enhance its position as a regional logistics hub.

Progress is also being made at the institutional level, including improvements in project planning and management, as well as in optimizing asset management. These efforts will help reduce the full life-cycle costs of infrastructure and ensure that investments create long-term value. ADB continues to work with the Georgian Roads Department to modernize road asset management systems, support decarbonization, and raise road safety awareness.

However, modernization is not yet complete. The shift from infrastructure construction to managing and optimizing transport networks—including through improved maintenance, digital systems, and logistics efficiency—is the next step. Accordingly, ADB believes that Georgia is entering a more advanced phase, where the role of technology, data, and intermodal integration is becoming increasingly important.

How would you assess the current and future needs for road, rail, port, and logistics infrastructure?

Georgia has made real progress in upgrading major highways, including through ADB-supported projects. The next stage should focus more on road safety, climate resilience, and proper maintenance of infrastructure.

Improving secondary and local roads is critical to ensuring that regions outside major urban centers are fully connected to markets, employment opportunities, and essential services.

Better integration of railways and ports will significantly reduce transportation costs and increase Georgia’s competitiveness as part of a multimodal supply chain connecting Central Asia and Europe. Strong coordination between port development, rail, and road infrastructure is essential to achieve maximum economic impact.

Logistics infrastructure and systems are playing an increasingly important role. Physical investments should be complemented by modern logistics centers, digital freight management systems, efficient border and customs procedures, and data-driven transport management. This “soft infrastructure” significantly reduces delays and costs for businesses. Within the framework of the CAREC program, Georgia is actively implementing the digitalization of customs procedures and enhancing seamless connectivity between the program member countries.

By coordinating investments in roads, railways, ports, and logistics—and where possible, engaging the private sector—Georgia can further enhance its role as a regional connectivity hub and ensure that infrastructure continues to support inclusive and sustainable economic growth.

How does ADB assess Georgia’s energy security, renewable energy potential, and green energy transition? How would you assess the country’s potential in this regard?

Renewable energy can play a central role in strengthening Georgia’s energy security—by reducing its dependence on imported fuels, diversifying its energy mix, and reducing its vulnerability to external price and supply shocks. ADB supports Georgia’s energy sector through a combined approach of investment, policy cooperation, and capacity building.

We have helped modernize and strengthen Georgia’s electricity transmission system to make it more efficient and financially sustainable. In 2025, ADB approved a $104 million investment to build Georgia’s first energy storage substation—a significant step toward integrating renewable energy, improving the stability of the power system, and reducing dependence on neighboring countries. This initiative also creates space for greater private sector participation in clean energy production. ADB works directly with private renewable energy developers. In 2020, ADB acted as the lead investor in a USD 250 million green bond issued by Georgia Global Utilities, and in 2022, it participated in an USD 80 million green bond issued by Georgian Renewable Power Operations — both of which were secured by hydro and wind energy projects with a combined capacity of over 70 MW. Earlier, ADB financed the Adjaristskali HPP project — a 185 MW hydropower plant in Adjara. This cascade of hydropower plants, including the Shuakhevi HPP, makes a significant contribution to Georgia’s renewable energy supply and facilitates cross-border electricity trade.

ADB is helping governments develop transparent bidding and procurement frameworks, improve sector planning, and integrate climate resilience and sustainability standards into projects. This integrated approach ensures that renewable energy investments not only build infrastructure, but are also financially viable, environmentally sound, and consistent with long-term energy transition goals. To support the next phase of innovation, ADB is providing technical assistance to several initiatives, including: assessing the electricity market, strengthening the capacity of renewable energy developers, rehabilitating small and medium-sized Soviet-era hydropower plants, assessing the potential for green hydrogen, and identifying policy and investment needs to stimulate private sector engagement in the energy sector.

What steps should Georgia take to strengthen the competitiveness of the private sector and SMEs?

Developing the private sector and strengthening the competitiveness of small and medium-sized enterprises requires a comprehensive and integrated approach. Key priorities include improving access to finance — particularly long-term and local currency financing — strengthening the capacity of companies by supporting skills development and innovation, and addressing infrastructure gaps that constrain productivity, particularly outside Tbilisi.

Expanding access to finance for women-owned or -led enterprises, as well as increasing access to finance beyond major cities and regional centers, is critical to creating sustainable livelihoods in rural communities and strengthening Georgia’s economic resilience. In this context, ADB is working with local commercial banks to ensure access to finance for small and medium-sized enterprises through investments in gender, green, and sustainable bonds, promote inclusive and environmentally responsible growth, and provide guarantees for trade finance.

Strengthening local enterprises will also help reduce Georgia’s high dependence on exports and mitigate risks from volatile commodity prices.

How does ADB assess the development of Georgia’s capital market and what are the key recommendations for deepening local financial markets?

Stable, long-term financing in local currency is essential for building a sustainable and inclusive economy. In recent years, ADB has played a catalytic role in strengthening Georgia’s capital markets by supporting the issuance of local currency bonds and reducing its reliance on foreign currency financing.

By participating as a lead investor in a multi-GEL denominated bond issue, ADB has helped to strengthen investor confidence and establish longer-term financial instruments in the market. ADB’s investments in local bonds have also supported the development of sustainable finance. By supporting green and sustainability-related bonds issued in local currency, ADB has channeled capital into priority sectors such as renewable energy, climate-resilient infrastructure, and energy efficiency.

Beyond sovereign instruments, ADB’s support for local financial institutions’ GEL-denominated bonds has expanded access to long-term financing for businesses, especially small and medium-sized enterprises. When financing is more readily available in local currency, Georgian companies are more willing to invest, expand, and create jobs without taking on excessive foreign exchange risk.

The impact of this support goes beyond individual transactions. ADB’s engagement has sent a clear signal to the market that Georgia’s capital market is attractive for investment, sustainable, and open to adopting international best practices. As a result, market liquidity has increased, the investor base has expanded, and the momentum for expanding local currency financing has strengthened.

Can you outline the new investment projects planned by ADB in Georgia by 2026? How would you assess ADB’s contribution in this direction over the past years? What volume of investments do you plan to implement in Georgia this year?

ADB plans to expand its support for private sector development and sustainable finance. This includes initiatives to deepen capital markets, promote local currency financing, and mobilize private capital for green investments, as well as financing micro, small, and medium-sized enterprises, trade, and supply chains. Particular priority will be given to developing rural communities and supporting women-owned or women-managed businesses.

How would you assess the effectiveness of the Asian Development Bank (ADB)’s engagement with the Government of Georgia? How do you assess ADB’s engagement with key institutions, including the Ministry of Economy and Sustainable Development of Georgia, the Ministry of Infrastructure, the Ministry of Finance, and the National Bank of Georgia?

Over the years, we have built a trusting partnership with the Government of Georgia, based on shared priorities, consistent progress on reforms, and timely investment. Our engagement is delivering tangible results. With total ADB financing of nearly $6 billion since 2007 and investments of approximately $1 billion in 2025 alone, we are supporting transformative and forward-looking projects.

These projects include strengthening Georgia’s role in the Karek Second Corridor, the Middle Corridor, supporting transport and energy infrastructure, and facilitating private sector development. Regional cooperation is central to all of these areas, and ADB will continue to support Georgia in its efforts to connect markets between Asia and Europe.

What key structural challenges does ADB see as needing to be addressed in order for Georgia to achieve sustainable and inclusive economic growth? What reforms are most important to attract more foreign direct investment to Georgia?

As Georgia aims to establish itself as a regional hub for transport, trade, and logistics in global value chains, deeper integration into these chains requires coordinated policies to address remaining infrastructure and regulatory gaps. The logistics sector in particular has significant potential to accelerate integration—by expanding trade flows, promoting cluster development, and supporting the establishment of integrated economic zones.

Strengthening multilateral cooperation can accelerate economic growth, create better jobs, and contribute to poverty reduction. With transparent and predictable policies from partner countries, Georgia is well-positioned to leverage its strategic geographic location and institutional capacity to enhance its participation in supply chains and move into higher value-added activities. ADB remains committed to supporting Georgia’s priority reforms through investments, policy dialogue, and close collaboration with both public and private sector partners.

Source: businessinsider.ge