Middle class to suffer most if visa liberalization with EU ends, Georgian economist

As the European Union has officially warned the Georgian government and given it a deadline of August 30 to fulfill its obligations, the risk of visa liberalization suspension is becoming increasingly real. While the government insists that the potential damage will be minimal and won’t seriously impact the country’s economy, experts predict a much harsher outcome. Giorgi Kepuladze, founder of the organization “Society and Banks,” explained in an interview with Front News what kind of economic blow Georgia might face if visa-free travel is suspended and how it could affect citizens’ everyday lives and the country’s development.

– Since the EU officially warned the government and gave a deadline to fulfill obligations by August 30, the risk of visa liberalization suspension has increased. What kind of economic damage could the country face in this case? The government claims the impact would be minor and won’t seriously harm the economy.

– It would undoubtedly be a serious blow, affecting our country in multiple ways. First and foremost, visa-free travel would be suspended, making it significantly harder for our citizens to travel to Europe. Currently, it's very easy and affordable for Georgians to reach the EU. Visa-free travel has had a powerful effect on Georgia over the past years. For example, take Kutaisi Airport – in 2017 it served only 400,000 passengers, while now it handles up to 1.7 million. Even today, the number remains higher than in previous years. So what does that mean for our economy in terms of income? People are employed there, transportation infrastructure operates to serve travelers, and all of this involves spending money. Visa-free travel supports not only outbound travel but also inbound tourism. Frequent, low-cost flights bring tourists from the EU to Georgia. The tourism sector will suffer, and so will remittances. Tourists from the Schengen Area can stay in Georgia for up to 90 days – many use that time for temporary or seasonal employment.

– Can we say that the suspension of visa-free travel would hurt middle-income families the most, whose members either live abroad or travel to Europe for seasonal work?

– Yes, the most affected would be middle- and low-income families. Those who’ve gotten rich winning tenders at the public’s expense may not feel the impact financially. But in the end, the problem will reach everyone. The hardest hit will be low-income and vulnerable households, where even small losses have a major impact.

Regarding remittances – last year, Georgia received 1.5 billion GEL from EU countries. In June 2025, 45% of all remittances came from the EU. These funds directly influence people’s purchasing power and sustain the consumer market. If visa-free travel is suspended, that income will disappear. Families that rely on remittances and seasonal work won’t spend that money anymore, triggering a chain reaction affecting businesses as well. Fewer properties will be sold, and the rental market will face serious issues. It would also send a negative political signal to investors considering projects in Georgia. Some current investors may reconsider and exit the market. Access to financial resources could become more difficult, disrupting business models. For example, when visa-free travel exists, you can book a meeting in Berlin, buy a ticket online, and fly the next day. Without that flexibility, everything becomes harder.

– Can we quantify the damage? Can you name a specific figure?

– Roughly speaking, our estimate is that the damage could amount to $600–700 million. It could even reach $1 billion. There are also psychological factors to consider. People tend to feel losses more deeply than gains. We’ve become accustomed to the comfort that visa-free travel provides. Losing that would be a serious psychological shock. Over the last 20 years, research has shown that economic behavior is highly influenced by people’s outlook. If people have no hope for the future, they spend less and take fewer risks, worsening the situation. For instance, if visa liberalization is suspended and we lose half a billion dollars, what will businesses do to mitigate that risk and loss?

– Do you expect this could also lead to depreciation of the lari?

– Yes, of course. Such expectations would accelerate lari depreciation. People would rush to convert their GEL into dollars or euros, rapidly weakening the lari. We all know what follows: higher prices on imports, fuel, and overall inflation. It would be a severe spiral of negative effects on the public. This would impact every layer of society. No one will get out of this unscathed. The first to suffer will be the socially vulnerable, whose voices the government often manipulates.

– The government claims that the country’s economy is growing, but most people don’t feel this growth in their wallets. How do you explain that, and what is driving this statistical growth? Who is benefiting?

– This growth is mostly tied to money inflows from Russian migrants. Remittances from Russia are now, fortunately, declining. Their share of total remittances is also falling. Georgia also became a key re-export hub – for example, cars were exported to Kyrgyzstan, but in reality, those vehicles went to Russia.

Some people earned money and got jobs through that. But we also saw serious inflation and price hikes in the country, which persist. Inflation has essentially “eaten” the economic growth. Some may have seen wage increases, but average salaries have only gone up on paper. Living costs have increased so much that they outpace income gains. Especially for the poor, any benefits from growth are hard to feel. In a growing economy, the rich may get richer faster, but the poor don’t catch up. And expenses rise for everyone. In June, food inflation reached 10%. That hits harder than a drop in rent prices in Tbilisi.

– Many landlords are unwilling to accept the reality that rental prices have fallen and demand is weaker than supply. How long can this resistance last?

– The market will regulate it. When demand drops, landlords will be forced to lower prices. That’s how a free market works – oversupply and low demand automatically drive prices down. For a while, there was a surge in rental demand, leading not only to hotel openings but also to people buying apartments to rent out. That demand has now declined – many migrants have already left the country.

– Let’s talk about migration. We’re increasingly seeing foreigners employed in various service sectors – couriers, taxi drivers, etc. This has sparked public frustration, as they work for lower wages and compete with locals. Business owners, however, say they help solve labor shortages. What is your view on this?

– I don’t see it as a painful issue. Georgia has a free market economy, so any foreigner has the right to work. This situation likely stems from local workers being unwilling to take certain jobs for the offered pay. Migrants are willing to work for lower wages, and that benefits employers. The government should support skills development so that Georgian workers can earn at least 1,000 GEL monthly. Low-wage positions mean low qualifications – which results in low income. If we want to boost competitiveness, regulation isn’t the way. We must raise qualifications instead.

By Elza Paposhvili