Archaeological research demonstrates that Georgia has been involved in commerce with many lands and empires since the ancient times, largely due its location on the Black Sea and later on the historical Silk Road. Gold, silver, copper and iron have been mined in the Caucasus Mountains. Wine making is a very old tradition. The country has sizable hydropower resources. Throughout Georgia's modern history agriculture and tourism have been principal economic sectors, because of the country's climate and topography.
For much of the 20th century, Georgia's economy was within the Soviet model of command economy. Since the fall of the USSR in 1991, Georgia embarked on a major structural reform designed to transition to a free market economy. As with all other post-Soviet states, Georgia faced a severe economic collapse. The civil war and military conflicts in South Ossetia and Abkhazia aggravated the crisis. The agriculture and industry output diminished. By 1994 the gross domestic product had shrunk to a quarter of that of 1989. The first financial help from the West came in 1995, when the World Bank and International Monetary Fund granted Georgia a credit of USD 206 million and Germany granted DM 50 million.
Since early 21st century visible positive developments have been observed in the economy of Georgia. In 2007 Georgia's real GDP growth rate reached 12%, making Georgia one of the fastest growing economies in Eastern Europe.The World Bank dubbed Georgia "the number one economic reformer in the world" because it has in one year improved from rank 112th to 18th in terms of ease of doing business., The country has a high unemployment rate of 12.6% and has fairly low median income compared to European countries.
The 2006 ban on imports of Georgian wine to Russia, one of Georgia's biggest trading partners, and break of financial links was described by the IMF Mission as an "external shock. In addition, Russia increased the price of gas for Georgia. This was followed by the spike in the Georgian lari's rate of inflation. The National Bank of Georgia stated that the inflation was mainly triggered by external reasons, including Russia’s economic embargo. The Georgian authorities expected that the current account deficit due to the embargo in 2007 would be financed by "higher foreign exchange proceeds generated by the large inflow of foreign direct investment" and an increase in tourist revenues.The country has also maintained a solid credit in international market securities. Georgia is becoming more integrated into the global trading network: its 2006 imports and exports account for 10% and 18% of GDP respectively. Georgia's main imports are natural gas, oil products, machinery and parts, and transport equipment.
Since coming to power Saakashvili administration accomplished a series of reforms aimed at improving tax collection. Among other things a flat income tax was introduced in 2004 As a result budget revenues have increased fourfold and a once large budget deficit has turned into surplus.
Georgia is developing into an international transport corridor through Batumi and Poti ports, an oil pipeline from Baku through Tbilisi to Ceyhan, the Baku-Tbilisi-Ceyhan pipeline (BTC) and a parallel gas pipeline, the South Caucasus Pipeline.
Tourism is an increasingly significant part of the Georgian economy. About a million tourists brought US$313 million to the country in 2006. According to the government, there are 103 resorts in different climatic zones in Georgia. Tourist attractions include more than 2000 mineral springs, over 12,000 historical and cultural monuments, four of which are recognised as UNESCO World Heritage Sites (Bagrati Cathedral in Kutaisi and Gelati Monastery, historical monuments of Mtskheta, and Upper Svaneti).
As of 2001 54% of the population lived below the national poverty line but by 2006 poverty decreased to 34%. In 2005 average monthly income of a household was GEL 347 (about 200 USD). IMF 2007 estimates place Georgia's nominal GDP at US$10.3 billion. Georgia's economy is becoming more devoted to services (now representing 65% of GDP), moving away from agricultural sector ( 10.9%).