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Resume:Table 1 shows the main indicators of the gross domestic product (GDP) dynamic. According to 2019’s data, the GDP in 2015 prices (real growth without considering the inflation effect on economic growth figures) amounts to GEL 40.4 billion which constitutes a 32.2% growth as compared to the figure for 2012. In this part, Ivane Machavariani’s statement is accurate. However, the average real economic growth was 4.08% in 2013-2019 instead of 4.8%.

Of note is that the aforementioned statement was made in response to some members of the opposition who offer an analysis of the GDP dynamic based on the USD denominated figure which is a wrong approach. To analyse a dynamic of people’s incomes, there is no reason to convert to USD because GEL is the legal tender in Georgia and people’s expenses are mostly denominated in GEL whilst the inflation figure in itself contains the growth of prices as a result of changes in the currency exchange. Therefore, the nominal GDP should be adjusted to the inflation figure instead of being converted to USD in order to obtain the real figure.

Analysis

On 5 May 2020, on air on TV Imedi’s broadcast, Arena, the Minister of Finance of Georgia, Ivane Machavariani, stated (from 12:00): “In 2012-2019, the economy was growing by 4.8% on average. In total, the economy increased perhaps by a third in real figures.”

The gross domestic product (GDP) is the total value of all finished goods and services produced within a country’s borders for a certain period of time and which is a measurement of the size and the scale of a country’s economy. In turn, the GDP per capita is one of the indicators of a country’s standard of living.

Table 1 shows the main indicators of the gross domestic product (GDP) dynamic. According to 2019’s data, the GDP in 2015 prices (real growth without considering the inflation effect on economic growth figures) amounts to GEL 40.4 billion which constitutes a 32.2% growth as compared to the figure for 2020. In this part, Mr Machavariani’s statement is accurate. However, the average real economic growth was 4.08% in 2013-2019 instead of 4.8%.

Table 1: GDP Dynamic in 2012-2019

2012

2013

2014

2015

2016

2017

2018

2019*

GDP in Current Prices, GEL Billion

27.2

28.6

31.1

33.9

35.8

40.8

44.6

50

GDP in Constant 2015 Prices, GEL Billion

30.4

31.5

32.9

33.9

34.9

36.6

38.4

40.4

GDP in Current Prices, USD Billion

16.5

17.1

17.6

14.9

15.1

16.2

17.6

17.7

Real GDP Growth, %

6.4

3.6

4.4

3

2.9

4.8

4.8

5.1

GDP in Current Prices (PPP)

32.162

33.911

36.07

37.547

39.038

41.699

44.784

47.91

Source: National Statistics Office of Georgia

The Minister made his statement in response to a journalist’s remark about an unspecified Facebook post which stated that the GDP in USD had decreased. Of note is that the members of the opposition often use USD-denominated nominal figures to analyse the GDP dynamic which is a wrong approach. FactCheck has written about this issue many times in the past. Certainly, the depreciation of the national currency exchange rate entails a number of negative consequences. Among these are an increased debt service burden for those who have income in GEL and obligations in a foreign currency, more expensive import and travel abroad, etc. However, there is no reason to convert GEL to USD in order to analyse the dynamic of people’s incomes because GEL is the legal tender in Georgia and people’s expenses are mostly denominated in GEL whilst the inflation figure in itself reflects the growth of prices as a result of changes in the currency exchange. Therefore, the nominal GDP should be adjusted to the inflation figure instead of being converted to USD in order to obtain the real figure.

It is possible to analyse the dynamic of people’s real incomes in international dollars based on purchasing power parity (PPP) for the sake of making comparisons. The PPP approach envisions that different currencies in the world have different purchasing power and takes the change in exchange rates into account. This figure in 2019 increased by 49% as compared to 2012.