Genadi Arveladze: “As a result of the government’s anti-crisis decisions, the economy grew by 12.7% in January-July. Leading financial organisations increased the forecasted figures of Georgia’s economic growth. The International Monetary Fund named Georgia as a country where the fastest economic recovery is expected across the European region in the mid-term perspective.”

Verdict: FactCheck concludes that Genadi Arveladze’s statement is HALF TRUE.

Resume:

According to the preliminary estimates of the National Statistics Office of Georgia, the economic growth rate for the first seven months of 2021 is 12.4%. The 12.7% economic growth, named by the Deputy Finance Minister, corresponds to the forecasted growth rate for the period of January-June. This double-digit economic growth rate is partially stipulated by the base effect which puts that part of Mr Arveladze’s statement where he links economic growth figures to “anti-crisis decisions” into question. As of January-July 2020, the economy was declining by -5.5% on average.

According to the World Bank’s forecast, Georgia’s expected economic growth rate in 2021 will be 6% which is 2.2 percentage points higher as compared to its earlier forecast. According to the International Monetary Fund’s (IMF) 19 July 2021 estimate, a 7.7% economic growth rate is expected for 2021 which is a positive fact since the initial forecast was nearly twice lower. However, in the case of a 7.7% economic growth rate in 2021, the economy will only grow by 1% as compared to 2019. Georgia’s GDP growth forecast for 2022 is 5.8%. The IMF has not yet unveiled updated statistics of forecasts for 2021 and beyond. The IMF’s latest large database was published in April in which Georgia was indeed ranked first across Europe in terms of the average forecasted growth rate in 2021-2025. However, it is so far unknown whether or not Georgia can keep the first position when the updated forecasts are published on 12 October 2021.

Given the fact that the named figure can literally be true, of necessary mention is that the uncertainty level is very high amid the pandemic and forecasts undergo substantial changes in a very short time. Therefore, it is early to make judgments of success or failure based on currently available forecasts alone.

Analysis:

The Deputy Minister of Economy of Georgia, Genadi Arveladze, stated: “As a result of the government’s anti-crisis decisions, we see a significant growth in Georgia’s economy which amounted to 12.7% in January-July. The leading financial organisations revised forecasted economic growth figures published at the start of the year and increased them. For instance, the IMF increased forecasted Georgia’s GDP growth figure to 7.7% and named Georgia as a country where the fastest economic recovery is expected across the European region in the mid-term perspective.”

According to the preliminary estimates of the National Statistics Office of Georgia, the real gross domestic product (GDP) growth in July 2021 amounted to 9.9% as compared to July 2020 whilst the average economic growth rate for the first seven months of 2021 is 12.4%. The 12.7% economic growth, named by the Deputy Finance Minister, corresponds to the forecasted growth rate for the period of January-June.

Although it is impossible to explain the high economic growth in April (44.8%), May (25.7%) and June (18.8%) using base effect alone, it is undisputable that high economic growth is partially stipulated by the base effect, since unprecedentedly stringent economic regulations have been in force throughout March-June 2020 which virtually paralysed most of the economic fields. This partially puts that portion of Genadi Arveladze’s statement where he links economic growth figures to “anti-crisis decisions” into question.

Graph 1: Economic Growth Rate (Month as Compared to Same Month of the Previous Year), Monthly Dynamic (%) and Economic Restriction Stringency Index in 2020-2021

Source: National Statistics Office of Georgia, Oxford’s CORONAVIRUS GOVERNMENT RESPONSE TRACKER

Thus far, there is a paucity of objective information about factors related to the positive dynamic of economic growth beyond the base effect and many questions remain unanswered. In addition, it is early to rush to certain conclusions, since the dynamic can technically be not fitting in a general picture within a short period of time and under the influence of multiple factors. On the one hand, we can take a look at the situation in the tourism/recreation field to highlight the fragility of the current conjecture where a very rapid recovery of economic processes and the opening borders for foreign travellers became possible as result of relaxed regulations. On the other hand, the situation vis-à-vis the epidemic in Georgia has become unprecedentedly bad which may be indicative of inconsistent deregulation, affecting not only the social and economic dimensions of the past months, but bringing the health-related dynamic into question as well.

According to the World Bank’s forecast, Georgia’s expected economic growth rate in 2021 will be 6% which is 2.2 percentage points higher as compared to its earlier forecast. The World Bank also forecasts that the global economy will grow by 5.6%. Therefore, Georgia’s forecasted economic growth rate is 0.4 of a percentage point higher as compared to the world’s average. However, in the Eastern Europe and Central Asia group, where the World Bank also puts Georgia, the expected economic growth rate is 3.9% and, therefore, Georgia’s expected economic growth rate is 2.1 percentage points higher as compared to the region’s average.

As of 19 July 2021, the IMF increased Georgia’s forecasted economic growth figure to 7.7% whilst the initial forecasted growth rate was 3.5%. According to the latest estimates of the IMF, the world economy will grow by 6% in 2021. Therefore, Georgia’s forecasted economic growth is 1.7 percentage points higher as compared to the world’s average. When it comes to Middle Eastern and Central Asian countries, where the IMF’s methodology says Georgia belongs, the expected economic growth rate is 4% which is 3.7 percentage points lower as compared to Georgia’s forecasted economic growth rate. In case of a 7.7% economic growth rate, Georgia’s economy will only grow by 1% as compared to 2019.

The IMF’s latest database was published in April in which Georgia was indeed ranked first across Europe in terms of the average forecasted growth rate in 2021-2025. However, it is so far unknown whether or not Georgia can keep the first position when the updated forecasts are published on 12 October 2021.