The Georgian economy includes diversified and mechanised agriculture alongside a well-developed industrial base. Agriculture accounts for about half of the gross domestic product and employs about one-fourth of the labour force; the industry and service sectors each employ about one-fifth of the labour force.
After independence the Georgian economy contracted sharply, owing to political instability (which discouraged foreign investment), the loss of favourable trading relationships with the states of the former Soviet Union, and the civil unrest in Abkhazia and South Ossetia, where key pipelines and transport links were sabotaged or blockaded. Georgia sought to transform its command economy into one organised on market principles: prices were liberalised, the banking system reformed, and some state enterprises and retail establishments privatised.
The interior of Georgia has coal deposits (notably at Tqvarcheli and Tqibuli), petroleum (at Kazeti), and a variety of other resources ranging from peat to marble. The manganese deposits of Chiatura rival those of India, Brazil, and Ghana in quantity and quality.
Its waterpower resources are also considerable. The deepest and most powerful rivers for hydroelectric purposes are the Rioni and its tributaries, the Inguri, Kodori, and Bzyb. Such western rivers account for three-fourths of the total capacity, with the eastern Kura, Aragvi, Alazani, and Khrami accounting for the rest.
Oil deposits have been located near Batumi and Poti under the Black Sea.
A distinctive feature of the Georgian economy is that agricultural land is both in short supply and difficult to work; each patch of workable land, even on steep mountain slopes, is valued highly. The relative proportion of arable land is low. The importance of production of labour-intensive (and highly profitable) crops, such as tea and citrus fruits, is, however, a compensatory factor.
The introduction of a system of collective farms (kolkhozy) and state farms (sovkhozy) by the Soviet government in 1929-30 radically altered the traditional structure of landowning and working, though a considerable portion of Georgia's agricultural output continued to come from private garden plots. Contemporary agriculture uses modern equipment supplied under a capital investment program, which also finances the production of mineral fertilisers and herbicides, as well as afforestation measures. A program of land privatisation was undertaken in 1992.
Tea plantations occupy more than 150,000 acres (60,000 hectares) and are equipped with modern picking machinery.
The vineyards of the republic constitute one of the oldest and most important branches of Georgian agriculture, and perhaps the best loved. Georgian winemaking dates to 300 BC; centuries of trial and error have produced more than 500 varieties of grape.
Orchards occupy some 320,000 acres throughout the country. Georgian fruits are varied; even slight differences in climate and soil affect the yield, quality, and taste of the fruit.
Sugar beets and tobacco are especially significant among other commercial crops. Essential oils (geranium, rose, and jasmine) also are produced to supply the perfume industry. Grains, including wheat, are important, but quantities are insufficient for the country's needs, and wheat must be imported. Growing of vegetables and melons has developed in the suburbs.
Livestock raising is marked by the use of different summer and winter pastures. Sheep and goats, cattle, and pigs are raised. Poultry, bees, and silkworms are also significant. Black Sea fisheries concentrate on flounder and whitefish.
The fuel and power foundation developed in Georgia has served as the base for industrialisation. Dozens of hydroelectric stations, including the Rioni and Sokhumi plants, as well as many stations powered by coal and natural gas, have been constructed. All are now combined into a single power system, an organic part of the Transcaucasian system.
The coal industry is one of the oldest mineral extraction industries, centred on the restructured Tqibuli mines. Deposits found in Tqvarcheli and Akhaltsikhe have increased production.
Manganese and non-metallic minerals ranging from talc to marble supply various industries throughout the countries of the former Soviet Union. The Rustavi metallurgical plant, located near the capital, produced its first steel in 1956. There are markets for its laminated sheet iron and seamless pipe products in Russia, Ukraine, and elsewhere. Zestaponi is the second major metallurgical centre.
The machine-building industry produces a diverse range of products, from electric railway locomotives, heavy vehicles, and earth-moving equipment to lathes and precision instruments. Specialized products include tea-gathering machines and anti-hail devices for the country's plantations. Production is centred in the major cities.
The chemical industry of Georgia produces mineral fertilisers, synthetic materials and fibres, and pharmaceutical products. The building industry, using local raw materials, supplies the country with cement, slate, and many prefabricated reinforced-concrete structures and parts.
Commonly used manufactured goods were previously imported in large part from the republics of the former Soviet Union, but a ramified system of light industries set up in major consumption areas in Georgia now produces cotton, wool, and silk fabrics, as well as items of clothing.
Products of the food industry include tea and table and dessert wines. Brandy and champagne production is also well developed. Other food-industry activities include dairying and canning.
Georgia has a dense transportation system. Most freight is carried by truck, but railways are important. Tbilisi is connected by rail with both Sukhumi and Batumi on the Black Sea and Baku on the Caspian.
An oil pipeline connects Batumi with Baku, Azerbaijan; two natural gas pipelines run from Baku to Tbilisi and then turn north to Russia. The seaports of Batumi, Poti, and Sukhumi are of major economic importance for the whole of Transcaucasia. The country's international airport is at Tbilisi.