On 21 December 2015, the already former Prime Minister of Georgia, Irakli Gharibashvili, summarised the last three years of the Government of Georgia’s activities and emphasised multiple issues. However, in the main Mr Gharibashvili talked only about achievements. The New Political Centre – Girchi commented upon the former Prime Minister’s speech with a post on Facebook which says that the following important economic indicators in Georgia worsened in the last three years: inflation, the state debt, the economic growth rate, export, import, national income per capita, pensions and the subsistence minimum.

In 2012, Georgia’s economy (gross domestic product, GDP) was USD 15.8 billion whilst the official estimate of the GDP is USD 14.9 billion in 2015. The decrease of USD denominated GDP was caused by the depreciation of GEL. In 2012, the USD-GEL exchange rate was 1 to 1.66 whilst at the end of 2015 it is 1 to 2.4. If we look at GEL denominated GDP, it was GEL 26.2 billion in 2012 and reached GEL 31.5 billion by the end of 2015. Inflation; that is, rising prices for goods and services, is one of the contributors to the increased GEL denominated GDP. Excluding inflation, the real GDP has increased by GEL 2.6 billion in the last three years. According to the prognosis of the Georgian Dream government, Georgia’s GDP should have been GEL 36 billion by 2015 whilst it in fact only increased to GEL 31.5 billion.

In spite of the rise of the GEL denominated GDP, the GDP growth rate has fallen considerably in the last three years. If in 2010-2012 the annual average GDP growth rate was 6.6%, this dropped to an annual average of 3.5% in 2013-2015. The Government of Georgia predicts a 3% economic growth for 2016. Of note is that the Government of Georgia did not achieve the targeted GDP growth rate even once in the period 2013-2015.

 Economic Growth Rate in 2010-2015

In regard to the annual national income per capita, it was USD 3,523 in 2012whilst it amounts to USD 3,717 in 2015. The reason behind the increase is that the new results of the population census (a total population of 3.7 million) are used to calculate the national income in 2015. The International Monetary Fund has already corrected the number of Georgia’s population for the previous years and, as a result,the annual national income per capita for 2012 was amended to be USD 3,837. Therefore, the annual national income per capita dropped in 2015 as compared to 2012 but in GEL (due to the change in the exchange rate) it increased by GEL 2,400. USD denominated national income is important to make comparisons with other countries whilst the GEL denominated indicator better visualises the changes in the domestic trends of the country.

The inflation rate (according to the Consumer Price Index) was -1.4% in 2012 which means that goods and services became less expensive. The inflation rate was 2.4% in 2013, 2% in 2014 and reached 6.3% in 2015.

At the end of 2012, the Government’s foreign debt was GEL 6.6 billion (USD 4 billion) which was 25.3% of the GDP whilst the domestic debt was GEL 1.9 billion or 7.2% of the GDP. In total, the government’s debt was GEL 8.5 billion which was 32.5% of the GDP. As of November 2015, the government’s foreign debt is GEL 10.1 billion (USD 4.2 billion) and the domestic debt is GEL 2.86 billion. In total, its debt is almost GEL 13 billion which constitutes 41.3% of the country’s GDP. The increase in the foreign debt was mostly caused by the depreciation of GEL whilst the domestic debt was increased by almost GEL 1 billion due to the taking of additional loans.

Georgia’s export of goods in January-November 2015 dropped by USD 159 million (7.3%) as compared to 2012 and reached USD 2,019 million. In regard to import, it also dropped by USD 479 million (6.5%) and reached USD 6,873 million.

At the end of 2012, the average pension was USD 67 whilst at the end of 2015 it is USD 65. However, as a pensioner usually spends his pension in GEL, it would be more expedient to assess the changes in the amount of pension in GEL. In this case, the increase of pensions was GEL 35-50 but it is important to take the rate of inflation into consideration; that is, the changes in the so-called ‘real pensions.’ If we compare the purchasing power of a GEL 160 pension in 2015 to 2012, it will be equal to GEL 145 (in 2012 purchasing power). Thus, it means that the real growth of pensions was only GEL 20-35.

The subsistence minimum for a medium-sized family was GEL 250 in 2012 whilst in November 2015 it reached GEL 278.

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Additionally, of necessary mention is that the exchange rate of GEL to USD has depreciated by 45% in the last three years and Georgia’s official currency reserves (which is an important indicator for financial stability) decreased by USD 370 million (14%).

The amount of foreign direct investments also increased in 2014-2015 as compared to 2012. In 2014, the amount of foreign direct investments was USD 1,758 million which is twice as much as the amount of foreign direct investments in 2012. Additionally, USD 1,019 million was invested in Georgia in the first nine months of 2015 which already exceeds the number registered in 2012.

Even though some of the indicators named by the New Political Centre – Girchi are not logically compared in USD, the information in general offers a correct illustration of the macroeconomic changes which have taken place in the last three years. Most of the indicators indeed worsened. Therefore, when the former Prime Minister, Irakli Gharibashvili, was speaking about the achievements of his government (which was basically naming the amount of money spent in this or that field), he did not say anything about the macroeconomic effects of the bloated budget spending which is the principal cause behind the increased government debt. Additionally, the high deficit spending of the budget has a periodic negative impact upon the GEL exchange rate and price levels. Together with the difficult situation in the region, the government’s economic policy, which was not designed to achieve high economic growth, was a reason behind the slowing down of the country’s economic growth rate.