On 11 December 2017, the Minister of Finance of Georgia, Mamuka Bakhtadze, stated: “If we take a look at the statistics for the first three quarters, Georgia has never had such a large amount of investments as this year.”
FactCheck took interest in the accuracy of the statement.
The National Statistics Office of Georgia publishes information in regard to foreign direct investments (FDI) made in Georgia on a quarterly basis. According to the Office’s information, the amount of FDI made in Georgia in the third quarter of 2017 was USD 594.5 million which is 17.6% more as compared to the same figure of the previous year. Of note is that the highest amount of FDI made in the third quarter of a year was registered in 2014 – USD 729.4 million.
According to the total figures of the three quarters, USD 1,346.5 million was invested in Georgia in the period of January-September 2017.
The National Statistics Office of Georgia has been calculating the volume of FDI to Georgia since 1997. The total amount of investments made in the first three quarters of 2017 is indeed the highest. However, the record figure was registered because of the Office’s decision to amend the amounts of investments made in previous years. As a result, the amount of investments made in 2007 (before the decision to amend, the highest amount of investments was made in 2007) was cut by USD 265 million.
According to the quarterly report published by the National Statistics Office of Georgia, current indicators take into account the International Monetary Fund’s (IMF) recommendation which envisions the revision of FDI figures and an alignment of the figures of the National Bank of Georgia with the National Statistics Office of Georgia. This said, however, FactCheck is unaware of the exact content of the IMF’s recommendation and the extent to which its recommendation is responsible for making the correction. Further, if the data were incorrect, then it is also unclear why this information was only detected after ten years. In order to clarify this issue, FactCheck addressed the National Statistics Office of Georgia with respective questions and we will provide our readers with updated information once we receive the Office’s answers.
In regard to the percentage growth of investments, the volume of FDI in 2017 increased by 3% as compared to the previous year according to the data of the first three quarters of the year. Of importance is that the aforementioned figure was 5% in 2016 whilst the highest growth rate in the accounting period at 72% was registered in 2014.
Graph 1: Foreign Direct Investments in Georgia in 2007-2017 (Figures for the First Three Quarters, USD Million)
Source: National Statistics Office of Georgia
According to the National Statistics Office of Georgia, the highest amount of FDI was made from Azerbaijan, amounting to USD 378 million. In terms of investments, Azerbaijan is followed by Turkey, the UK, the Netherlands and the USA. Of importance is that Russia is not among Georgia’s top ten investor countries. Additionally, according to the figures of the first three quarters of 2017, the amount of investments from European Union (EU) countries was USD 29 million more as compared to the amount of investments from the Commonwealth of Independent States (CIS) member nations.
Generally, the investment to gross domestic product (GDP) ratio is a better method to measure investment figures as compared to nominal numbers. This is because the larger a country’s economy is, the greater the amount of investments it requires for development. Graph 2 illustrates that the FDI to GDP ratio was the highest in 2006-2008, it fell significantly in 2009-2013 and was 11% on average between 2014-2016. The FDI to GDP ratio for the first three quarters of 2017 is approximately 11.5%.
Graph 2: FDI to GDP Ratio in Georgia
According to the quarterly report of the National Statistics Office of Georgia published on 11 December 2017, USD 594.5 million was invested in Georgia in the third quarter of 2017. In total, the amount of investments made in Georgia in the period of January-October 2017 is USD 1,346 million which is 3% more as compared to the same figure of the previous year and exceeds any identical figure of the previous years. However, this happened as a result of National Statistics Office of Georgia’s decision to cut the 2007 investment figures by USD 265 million.
Of note is that the real size of investment is better depicted by the investment to GDP ratio instead of its nominal value. In this regard, Georgia’s FDI to GDP ratio was higher as compared to 2017.
FactCheck is endeavouring to get specific and comprehensive answers from the National Statistics Office of Georgia as to the reasons for the previous years’ figures being cut, especially those registered before 2012 (investments made under the previous government). At this stage, FactCheck leaves Mamuka Bakhtadze’s statement WITHOUT VERDICT.