Tech experts debate genuine influence of tech industry on Georgia's decelerating economic expansion
In Georgia, the information technology sector has been a significant driver of economic growth since 2021, contributing to an average real GDP growth of over 9% annually. This growth can be attributed to foreign direct investment and digital nomad/tax incentives that attracted $12 million in ICT startup investments since 2018.
However, concerns have been raised about the actual local job creation and income tax contributions from foreign IT firms operating in Georgia. Foreign IT companies often bring in remote workers who may not contribute significantly to local social insurance taxes or national revenues. This can lead to an overestimation of the sector's impact on local employment and tax revenue.
Official labor statistics indicate that Georgia's total employment reached over 5 million jobs with a low unemployment rate of 3.5%. However, the share of these jobs directly attributable to the IT sector, particularly foreign firms, in terms of stable, taxable employment remains less clear. The sector's growth is also linked with increased informality and structural unemployment challenges, which may distort the true economic contributions of foreign IT firms.
Economist Soso Berikashvili has cautioned that much of the reported activity in the tech sector may be limited to turnover on paper. Additional indicators, such as VAT-paying company turnover, suggest a broader deceleration in the economy.
The growth in the first half of 2025 was 8.3%, but the overall growth pace for the year is slowing, with a drop from 7.5% in April and May to 6.3% in June. The primary contributors to the economic growth were information and communication, manufacturing, transport, and trade.
Despite these concerns, the reported growth of the information technology sector in Georgia is generally supported by strong economic indicators. However, it is crucial to interpret these figures cautiously, particularly with regard to local employment and fiscal contributions from the foreign IT segment.
This interpretation is supported by IMF 2025 consultation reports indicating the ICT sector's strong GDP role but also recognizing structural challenges in employment and revenue. Investment summaries show moderate FDI-scale but questions on tax impact from international remote workers, while official labor data underscores growth but not specifically isolating the ICT foreign firm contributions.
In conclusion, while the information technology sector is indeed a key economic growth area statistically, its reported impact on local job creation and national revenue may be partly inflated due to the presence of foreign IT firms whose workers and income tax contributions are limited or misrepresented. Therefore, the official growth figures are accurate in aggregate economic terms but should be interpreted cautiously with regard to local employment and fiscal contributions from the foreign IT segment.
- The growth and development of the IT sector in Georgia's business landscape, driven by technology, has attracted substantial foreign direct investment and contributed to the sectors financial strength.
- However, there is concern about the actual local job creation and income tax contributions from foreign IT firms operating in Georgia, as foreign IT companies tend to bring in remote workers who may not significantly contribute to local social insurance taxes or national revenues.
