Georgia's economy – from cultivating land to harvesting innovation?
Policy Pulse - 30 May 2019 - George Anjaparidze
On May 26 Georgia marked its national day, celebrating 28 years of freedom. At the time of independence, Georgia faced major political, social and economic difficulties. One of the fundamental development challenges was how to move from an agrarian focused economy to a modern one. This issue still takes center stage today.
In 2017, 43% of the labor force in Georgia was employed in agriculture compared to 49% in 1991. Georgia has the highest proportion of employment in agriculture of any country in Europe. Germany, France, Italy and Spain all employ less than 5% of their labor force in the sector. The proportion of the work force employed in the agriculture sector in Georgia is comparable to levels observed in Cameroon (47%), Liberia (46%) and Benin (42%).
Furthermore, the value created by Georgian farmers is a fraction of their European peers. In 2017, an average Georgian farmer created value (output net of inputs) of $1,311 whereas a Swiss farmer created value of $30,884. Put differently, 1 Swiss farmer created as much value as about 24 Georgian farmers.
The policy response to the current situation needs to focus on two areas. First, policy support should be provided to help people transition out of the agriculture sector. Second, policies need to target improving the productivity and competitiveness of Georgian farmers.
Since independence, more Georgians have been displaced due to lack of economic opportunity than due to armed conflict. 1 in 4 residents left Georgia, resulting in a mass exodus. Creating higher-value economic opportunities in Georgia is essential for retaining the labor force. In addition, supporting the transition to higher-productivity jobs can serve as an engine for growth.
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