Irakli Gharibashvili: “We are one of the leaders in the whole world in terms of the economic growth rate.”
Verdict: FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY FALSE.
Resume:
The Prime Minister compares Georgia’s economic growth rate to the similar indicators of the other world countries. Whilst making such comparisons, it is important to provide readers with an accurate context. Therefore, FactCheck will review not only the data about which the Prime Minister is speaking but other important circumstances, too, which are not reflected in this statement.
Since the pandemic year hit the Georgian economy hard, it started to grow rapidly as compared to the same period of the previous year under lockdown and under relaxed and subsequently almost fully lifted COVID-restrictions. According to the World Bank’s data, Georgia is indeed one of the leaders among 147 countries with this growth rate and it ranks 13th. However, whilst assessing the economic growth rate, it is important to take into account the base effect which is associated with the declining Georgian economy in the first year (2020) of the pandemic. To show how the country’s economy deals with the pandemic, it is of paramount importance to take this base effect into account. When we add the context to this picture and compare Georgia’s economic growth rate to those of other countries, Georgia would be ranked 69th and not 13th. This type of analysis is needed in order to show how the country is handling the recession which was unleashed by the pandemic. Since it is impossible to keep the pandemic context out whilst verifying the Prime Minister’s statement and it is necessary to take the base effect into account, FactCheck concludes that Irakli Gharibashvili’s statement is mostly false since it does contain elements of truth although important facts which would give accurate information about the economic growth are ignored.
Analysis
The Prime Minister of Georgia, Irakli Gharibashvili, made the following statement in regard to the economic growth dynamic: “We are one of the leaders in the whole world in terms of the economic growth rate.”
According to the preliminary assessment of the National Statistics Office of Georgia, the real gross domestic product (GDP) growth in June 2021 was 18.7% as compared to the same period of the previous year whist the average GDP growth for the first six months of 2021 is 12.7%. Based on preliminary figures, the economic growth of Q2 of 2021 is 29.8% whilst the average decrease in the first quarter was 4.5%.
Graph 1: Economic Growth in 2019-2021, Monthly Figures
Source: National Statistics Office of Georgia
Georgia’s economy shrunk in Q1 of 2021. Therefore, the Prime Minister’s statement largely pertains to the ongoing economic growth forecast figures, particularly for May to June. Since worldwide consolidated statistics about Q2 monthly growth forecasts are unavailable, it is impossible to verify the Prime Minister’s statement that Georgia is one the world’s leading countries in terms of the current economic growth rate. In addition, the high forecasts vis-à-vis the ongoing economic growth rate are partly related to the base effect which would bring Georgia’s advantage over countries with a lower base effect into question. At the same time, there is a paucity of objective information about factors related to the current positive economic growth dynamic beyond the base effect and many questions remain unanswered. It is early to make specific conclusions since the dynamic can be technically left out of the general picture owing to the short time period and the influence of multiple factors.
For an analysis of a general dynamic, it would be relevant to compare Georgia’s annual economic growth rate forecasts given the greater availability of information and the higher reliability of the annual long-term dynamic. However, it is only natural that we would still encounter the problems of the changing economic conjecture and the base effect.
As of 19 July 2021, the International Monetary Fund (IMF) increased Georgia’s economic growth forecast to 7.7%. The IMF’s initial economic growth forecast was 3.5%. According to the IMF’s latest assessments, the world economy will grow by 6% in 2021. Therefore, Georgia’s economic growth rate is 1.7 percentage points higher as compared to the world.
According to the World Bank’s June forecasts, Georgia’s economic growth rate for 2021 will be 6% which is 2 percentage points higher as compared to the World Bank’s initial forecasts. The World Bank’s assessment says that the world economy will grow by 5.6% in 2021 and, therefore, Georgia’s economic growth rate forecast is 0.4 of a percentage point higher. At the same time, in the group of Eastern Europe and Central Asia, where the World Bank also places Georgia, the expected economic growth forecast is 3.9%. Therefore, Georgia’s economic growth rate forecast is 2.1 percentage points higher as compared to the region. According to the World Bank’s data, Georgia is indeed one of the leaders among 147 countries and ranks 13th with the 2021 economic growth rate forecast. However, if we take into account the importance of the base effect for the analysis, we will see that Georgia ranks 69th among the same countries based on the World Bank’s figures as compared to 2019 in terms of economic recovery. Therefore, countries which Georgia outperform in terms of economic growth rate forecasts were inflicted with much milder losses as compared to Georgia throughout 2020.
However, whilst assessing the economic growth rate, it is important to take into account the base effect associated with the declining Georgian economy in the first year (2020) of the pandemic. To show how the country’s economy deals with the pandemic, it is of paramount importance to take the base effect into account. When we add the context to this picture and compare Georgia’s economic growth rate to those of other countries, Georgia would be ranked 69th not 13th. This type of analysis is proper in order to show how the country is handling the recession which was unleashed by the pandemic. On the other hand, for countries with a drastic economic decline, it is easier to achieve economic recovery in the following time period. Therefore, FactCheck concludes that Irakli Gharibashvili’s statement is mostly false because it is partly accurate although important details which are necessary in order to have a full understanding are omitted.
