“In 2012, the gross domestic product we left was USD 15.9 billion, almost USD 16 billion. After four years, the gross domestic product has decreased by USD 1.5 billion and constitutes USD 14.3 billion.”

verified the accuracy of the statement.

In light of the depreciation of the GEL exchange rate, opposition political parties actively use the USD denominated gross domestic product (GDP) and other statistical data (average salary, pension, etc.) which can be measured monetarily to assess the changes in the country’s economic situation. This often involves the elements of manipulation by numbers. Taking the aforementioned indicators in foreign currency is not an appropriate way to process the data.

 GDP Change Trend

As illustrated by the table, the USD denominated nominal GDP was USD 15.85 billion in 2012 (USD 1=GEL 1.65) whilst it decreased by USD 1.52 billion in 2016 and equals USD 14.33 billion (USD 1=GEL 2.37). However, the comparison of these data, despite having accurate numbers, contains two important mistakes. First of all, it is noteworthy that the nominal GDP shows the changes caused by the inflation factor as well; thus, in order to compare the GDPs of two different periods, economic theory employs real numbers. The denomination of the GDP in a foreign currency is an inappropriate indicator for assessing the changes at the national level although this would produce a figure which would be comparable to those of other countries. However, even in this case it is expedient to use the number calculated by purchasing power parity (PPP) instead of simply taking the USD denominated GDP. This is because money’s purchasing parity varies in different countries and in practice you can buy different amounts of products and services in different countries for USD 1.

As illustrated by the table, the approved indicator in economic theory to assess GDP changes through time – the GDP denominated in the national currency (in 2010 prices) – has not decreased but, on the contrary, it has a growth tendency. In 2016, Georgia’s GDP was GEL 27.05 billion which is GEL 3.39 billion more as compared to the GDP in 2012.

The real GDP has also increased by GEL 2,100 if we caculate it per capita. At the same time, whilst analysing the GDP figure per capita, we have to take into account that the 2015-2016 data are calculated on the basis of the latest universal public census whilst the numbers before 2014 were calculated on the basis of an outdated public census. As result, taking into account the decrease in the population, the indicators before and after 2014 are not comparable with each other and indicator’s growth rate is good enough to have an understanding of real situation. However even on the basis of old census, that indicator is increased, albeit at a slow pace.

In 2012-2016, USD denominated nominal GDP has decreased by 1.52 billion dollars and dropped to USD 14.33 billion. However, decrease was not caused by a real change (decline of the economy), but because of depreciation of national currency exchange rate. Therefore, using factually accurate, although inappropriate data lead us to incorrect assessment of GDP changes.

According to the economic theory, in order to assess GDP change trend on a national level, the approved indicator is the change in real GDP. According to that figure GDP  in 2012-2016, have not decreased and on the contrary, grew by GEL 3.39 billion. The only decreased indicator is real GDP growth rate. Bearing these in mind, it is possible to say that negative trend underlined in Mikheil Saakashvili’s statement does not correspond a reality.