“Economic growth sees a threefold decline. Shortfall in the budget borders on one billion. Next year, you [government] are planning on taking a debt of over GEL 1.1 billion. You are expanding the budget deficit.”
At an ad hoc session held on 20 November 2013, the Parliament voted on the new Prime Minister’s candidacy and the government’s new composition. Delivering a speech at the session, member of the Parliamentary Minority Zurab Japaridze stated: “Economic growth sees a threefold decline. Shortfall in the budget borders on one billion. Next year, you are planning on taking a debt of over GEL 1.1 billion. You are expanding the budget deficit.”
FactCheckinquired about the accuracy of Zurab Japaridze’s statement.
Considering the context of Zurab Japaridze’s statement, mentioning “decline in economic growth,” the MP refers to a downturn in economic growth rates. The economic growth rate is a measure of the rate of change that a nation's gross domestic product (total value of products and services produced in the country throughout a year) experiences from one year to another. We verified the MP’s assertions regarding a decrease in economic growth rates based upon the dataprovided by the National Statistics Office of Georgia.
The table above depicts GDP growth rates for the first three quarters of 2012 and 2013. The average growth rate for the first three quarters of 2012 amounted to 7.4% while in 2013 the same indicator was at 1.7% which represents a 4.3-fold decline relative to the indices of the three quarters of 2012. Therefore, the downturn is even larger than claimed by the MP.
Budget shortfall is defined based upon the difference between the projected and real receipts of the budget. Receipts include revenues, financial and non-financial assets and growth of bonds. The table above presents preliminary indices of budget receipts for the first nine months of 2013 prior to a revision of the draft budget and also depicts cash execution for the same period. The difference between the forecast and the execution of receipts equals GEL 749.1 million. Although this figure is much lower than a billion, as estimated by Zurab Japaridze, logically, this data is still consistent with the MP’s statement as in the case if the current tendency persists, at the end of the year the shortfall could very well reach GEL one billion.
As for the matter of debt, Zurab Japaridze bases his statement upon the second version of the 2014 state draft budget presented to the Parliament in which the state debt was defined in the amount of GEL 1,132 million. In accordance with the third edition of the 2014 state draft budget, government bonds (state debt) were to be augmented by GEL 1,636 million. Of these, GEL 600 million will be obtained through issuing government securities. The government intends to take long-term investment loans in the amount of GEL 600 million from international financial institutions and foreign governments. Additional financial resources are provided for the support of the Georgian budget by the World Bank in the framework of the Development Policy – GEL 136 million and by various financial institutions – GEL 300 million.
Inquiring about the dynamics of the deficit in the budget, we compared the budget deficit of 2013 to that of 2014. The second version of the 2013 state budget presented to the Parliament foresaw the deficit to equal GEL 418 million (1.5% of GDP) while the second version of the 2014 state budget forecast a deficit of GEL 628 million (2% of GDP). The third version of the 2014 state budget raised the projected deficit to GEL 1,118 million (3.8% of GDP).
Conclusion
The economic growth rates of 2013 saw a greater downturn than asserted in Zurab Japaridze’s statement. Presently, we hold data on GDP indicators for only three quarters of the current year; comparing those to the statistical data of the three quarters of the previous year, we find that the economic growth rate saw a 4.3-fold decrease. As for the budget shortfall “bordering on GEL one billion,” indices of the three quarters illustrate a shortfall in the amount of about GEL 750 million. Considering current data on budget execution, however, by the end of the year the size of the shortfall might reach GEL one billion. In agreement with the 2014 state draft budget (second version), government debt totalled GEL 1,320 million. We also observe a rise in budget deficit in nominal as well as relative indicators.
Accordingly, we conclude that Zurab Japaridze’s statement: “Economic growth sees a threefold decline. Shortfall in the budget borders on one billion. Next year, you are planning on taking a debt of over GEL 1.1 billion. You are expanding the budget deficit,” is TRUE.
