Georgia demonstrates growing economic resilience but remains vulnerable to external shocks
Georgia has made much progress over the past decade. As a result of sound economic management, GNI per capita converged toward European Union (EU) levels, increasing from $3,048 in 2010 to $4,608 in 2021 (constant 2015 US$). The poverty rate (measured by the national poverty line) was more than halved over the same period. Nevertheless, structural challenges persist, notably weak productivity and limited high-quality job creation. More than a third of all workers are engaged in low-productivity agriculture. Poor learning outcomes and lack of skills also constitute a barrier to private sector growth.
Because of its trade openness and reliance on tourism, Georgia is vulnerable to external shocks. The swift post-pandemic rebound and the recovery from the initial impact of Russia’s invasion of Ukraine have demonstrated growing economic resilience, supported by sound macroeconomic management. The application for EU candidacy initiated in 2022 provides opportunities for further income convergence while requiring significant and sustained reforms.
Growth in 2022 is estimated at 10.1 per cent, generated by a surge in money transfer inflows, and by the recovery of tourism. Despite continued pressures likely on the demand side, inflation is expected to fall gradually.
The unemployment rate fell to 18 per cent in the first quarter of 2023 from 19.4 per cent in the same month a year earlier. The jobless rate for men was 20.3 per cent while that for women was 15.1 per cent. Meanwhile, the employment rate was up by 2.4 percentage points to 42.6 per cent. Moreover, labour force participation rate grew by 2.1 percentage points to 52 per cent. Informal economy remains high at estimated 46.2 per cent.
The ILO in Georgia
Following the 2020 Labour Law Reform facilitated by the ILO, the adopted amendments and the new provisions brought consistent progress, but gaps remain in the labour legislation compared to international labour standards. In addition, judicial application of international labour standards increased significantly, fostered by extensive ILO-supported capacity building of judges, legal practitioners and government officials.
Following the regulatory impact assessments in 2022 supported by ILO, the Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health, and Social Affairs has initiated tripartite discussions and the administrative process of ratification of the Labour Inspection Convention, the Protocol of 2014 to the Forced Labour Convention, 1930, and the Violence and Harassment Convention. At the same meeting, a discussion was also held on minimum wage reform. In January 2023, new legal provisions were adopted introducing minimum wage levels for the health sector employees, and measures for enforcement in the competence of the Labour Inspection’s Office.
Georgia also showed a commitment to complementing and updating the legal labour framework through adoption of by-laws on working time.
ILO recommends actions to address restrictions to the grounds for a strike and to sectors where workers can exercise their right to strike, as well as the ongoing possible criminal liability in cases of organization of strikes which are determined to be illegal, and which are not in line with ratified ILO Conventions.
After the dissolution in 2005 and being re-established in 2014, the organizational capacity of the Labour Inspection Office (LIO) has witnessed noticeable progress in the last few years, including the coverage of labour rights enforcement as a new component of its mandate. According to LIO’s 2022 report, 2,510 inspections were conducted on occupational safety and health (OSH) compliance, while 1,019 inspections were conducted on labour rights. The number of LIO staff, including labour inspectors, rose from 113 in 2021 to 167 at the end of 2022 (+48%). ILO’s internal assessment revealed that the policy on sanctions appeared remarkably mild in its first year of operation of LIO in the labour rights sphere. In 2021, only around 2 % of administrative sanctions issued by the LIO were fines. In 2022, the approach has changed and around one-third of administrative offence violations involved the imposition of fines. Some limitations still exist on the free initiative of labour inspectors to conduct inspections without prior notice, to impose fines when violations are found, and to ensure that workplaces are visited as frequently and thoroughly as it is necessary to ensure that legal provisions are complied with.
The Tripartite Advisory Council of the Chief Labour Inspector, instituted within the LIO, successfully operated during 2022, holding meetings involving representatives of the Parliament, the Public Defender of Georgia, trade unions, and employers’ associations.
The functioning of the collective labour dispute resolution mechanism needs to be improved based on integrated assessment. The framework analysis should include legal, procedural, institutional, and operational performance deficits within the existing mediation system, and any related dispute prevention and resolution procedures.
In 2020, the government announced it would develop an overarching legal act, the Social Code, with the aim of establishing a social security system that is sustainable, fair, and efficient. Its main objective was to introduce a comprehensive and integrated approach to social protection, including a regulatory framework for the social, health, and insurance sectors. However, the government shifted its focus from developing a unified Social Code to amending current legislation to reflect changes in social protection approaches. No changes have been introduced during the last year and there has been no progress on the Social Code.
In general, Georgia's social protection system is operating effectively, with clearly defined entitlements for each social transfer outlined in relevant legislation and a well-developed management information system. This contributed to Georgia’s capacity to handle crises such as the COVID-19 pandemic and the refugee influx caused by the war in Ukraine. During both shocks, the government allocated substantial funds for social transfers and extended social assistance programmes to cover vulnerable groups. Nevertheless, much effort is needed to improve Georgia’s compliance with the requirements of Convention 102 (social security minimum standards).
Georgia has ratified 18 Conventions including 8 out of the ten Fundamental Conventions, 2 out of the 4 Governance Conventions and 8 out of the 176 Technical Conventions. All 18 Conventions ratified by Georgia are in force. No Convention has been denounced and none have been ratified in the past 12 months.