Kakha Okriashvili: “As compared to 2012, the USD-denominated GDP increased by 14% in 2021, although it decreased considering inflation. As compared to 2012, the GDP decreased by USD 64 in 2017.”
Verdict: FactCheck concludes that Kakha Okriashvili’s statement is a MANIPULATION.
Economic growth/decline is measured by changes in the gross domestic product (GDP) which shows the volume of goods and services produced in a country. Given this definition, it is important that the GDP change indicator is reflective of the volume of produced goods and services instead of the dynamic of their prices or a USD-converted value. Economic growth is measured in GEL-denominated real GDP change which takes the price growth effect into account (free from the effect of inflation). In 2012-2021, the real GDP per capita increased by 36.3%. In 2017, the real GDP per capita increased by 20.3% as compared to 2012.
Kakha Okriashvili initially uses the USD-denominated nominal GDP figure which is the most erroneous approach since the picture is further distorted by the currency exchange rate fluctuation as well as not taking inflation into account. That part of Mr Okriashvili’s statement where he refers to inflation is seemingly correct. The USD-denominated real GDP did indeed decrease in 2021 as compared to 2012, although this figure is still not reflective of the GDP dynamic because the currency exchange rate fluctuation distorts the real picture.
Kakha Okriashvili’s statement uses indicators which are accurate. However, the real picture of economic development is distorted as a result of an incorrect interpretation of the data. Consequently, Mr Okriashvili’s statement is MANIPULATIVE.
MP Kakha Okriashvili, speaking about Georgia’s economic growth statistics, stated: “In 2012, the GDP per capita was USD 4,421 and in 2017 it was USD 4,357 as it decreased by USD 64. In 2021, the figure was USD 5,047 – the economy increased by 14% for ten years with an annual average growth of 1.1% and then decreased considering inflation.”
The gross domestic product (GDP) indicates the total amount of goods and services produced in a year for final consumption in a country which is the measurement of the size and the scale of a country’s economy. The GDP volume can be measured by a number of indicators (the nominal GDP, the real GDP, the GDP converted into other currency), although they are not universally applicable for describing a trend. Economic growth is measured by changes in the real GDP. Given the definition of the GDP, it is important that the GDP change indicator is reflective of the volume of produced goods and services instead of the dynamic of their prices or their USD-converted value.
On the other hand, the real GDP differs from the nominal GDP precisely because the former excludes the inflationary effect. In particular, the nominal GDP is adjusted to price level changes and this is how the real GDP is measured. Naturally, all authoritative organisations assess the GDP dynamic with that indicator. A selection of irrelevant unit of measurement will lead to wrong conclusions. For instance, the nominal GDP is not free from the inflation effect and it is wrong to use it for analysis in time (comparing data of different years). The use of the USD-converted nominal GDP figure is even more incorrect because it also includes currency exchange fluctuations apart from inflation and distorts the real trend. In the first part of Kakha Okriashvili’s statement, he uses exactly this indicator for analysis which shows the most imprecise picture from among the existing alternatives.
The other part of the statement where he refers to inflation introduces a seemingly correct element in the analysis. The USD-denominated real GDP in 2021 did indeed decrease by 30% as compared to 2012. However, this figure is still not reflective of the GDP dynamic because the currency exchange rate fluctuation distorts the real picture.
Table 1 shows the GDP statistics. The USD-denominated GDP figures named by Kakha Okriashvili are accurate. However, these figures do not reflect the economic growth in essence. The real GDP per capita in 2012-2021 increased by 36.3% whilst the real GDP per capita increased by 20.3% in 2017 as compared to 2012.
Table 1: Nominal GDP Per Capita Denominated in USD and Nominal GDP Per Capita Denominated in GEL, 2012-2021
Source: National Statistics Office of Georgia
Of note is that the USD appreciated globally in 2015 which resulted in a USD-denominated GDP decline in a number of countries. To highlight this analysis, Norway could be an example where its nominal USD-denominated GDP per capita shrank by nearly 23.7% as a result of the depreciation of the local NOK vis-à-vis USD in 2015 and dropped to USD 74,000 when it had been USD 97,000 in 2014. However, this does not naturally mean that Norway’s economy decreased and its GDP did not increase. Norway’s USD-denominated nominal GDP has still not returned to its 2014 level.