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Volatility in Georgia, Its Influence on the Investment Decisions of Multinational Enterprises and the Implications for Foreign Direct Investment Dynamics in the Country

Year: 2025

Type: article

Abstract: Georgia’s strategic location between Europe and Asia makes it a key destination for foreign direct investment (FDI). Since independence, the country has implemented economic reforms to enhance its business environment, including regulatory improvements, anti-corruption measures, and trade liberalization. Despite these efforts, Georgia faces political, economic, and social volatility, impacting investment decisions by multinational enterprises (MNEs). Political instability, including frequent government changes and regional tensions, creates uncertainty. Economic fluctuations in GDP growth, inflation, and exchange rates further complicate investment, while labour market concerns and social unrest add additional risks.Volatility can deter investment by increasing perceived risks, yet it also presents opportunities for MNEs adept at navigating uncertain environments. This study examines the relationship between Georgia’s instability and MNE investment strategies, focusing on how political, economic, and social factors shape the investment climate. Political shifts influence regulatory frameworks, economic volatility affects profitability, and social instability impacts labour costs and operational efficiency.By analyzing macroeconomic data, political stability, and market conditions, this research explores how MNEs perceive and respond to risk in Georgia. It assesses volatility’s sectoral impact and long-term consequences on FDI inflows, outflows, and distribution. The study contributes to international business literature by clarifying how volatility affects investment in emerging markets. It also offers recommendations for policymakers to enhance Georgia’s investment appeal and for MNEs to develop effective risk mitigation strategies. Combining theoretical insights with empirical data, this research provides a nuanced understanding of volatility’s role in shaping FDI dynamics.

Source: Financial and credit activity problems of theory and practice

DOI: 10.55643/fcaptp.3.62.2025.4753

Authors: Irina Vashakmadze, Nato Jabnidze, Irine Tavadze, Natalia Robitashvili

Institution: Batumi Shota Rustaveli State University

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $500