Lasha Khutsishvili: “It has been two consecutive years that the country has a double-digit economic growth and the tourism recovery figure exceeded the pre-pandemic period.”

Verdict: FactCheck concludes that Lasha Khutsishvili’s statement is MOSTLY TRUE.

Resume:

The Minister of Finance of Georgia, Lasha Khutsishvili, stated that it has been two consecutive years that Georgia has double-digit economic growth, export increased by 30% and the tourism recovery figure exceeded the pre-pandemic period by 7-8%.

In 2021 and 2022, Georgia’s economy increased by 10.5% and 10.1%, respectively. However, in the first case, the base effect was a key contributing factor to the growth rate because Georgia’s economy contracted by 6.8% in 2020. Export in 2022 increased by 31.8% as compared to 2021 and amounted to USD 5.593 billion whilst tourism revenues reached USD 3.517 billion which is 7.6% more as compared to 2019’s figure. FactCheck concludes that Lasha Khutsishvili’s statement is MOSTLY TRUE.

Analysis:

The Minister of Finance of Georgia, Lasha Khutsishvili, when commenting on the 2022 economic growth figures published by the National Statistics Office of Georgia, stated: “It has been two consecutive years that the country has a double-digit economic growth. Major economic growth contributors in the previous year were the significant growth of export, which increased by over 30%, and tourism recovery which exceeded the 2019 figure by nearly 7-8%.”

In 2020, as a result of the pandemic and COVID-regulations, Georgia’s economy shrank by 6.8%. Since 1994, Georgia has not experienced such economic backsliding, including 2009. A recession started in the second quarter of 2020 and continued up until the first quarter of 2021. Since the second quarter of 2021, regulations were drastically relaxed, economic activities were again allowed and borders re-opened. The revival of the economy was reflected on the statistics and the GDP growth rate reached 10.5%. Similar to 2020, Georgia was also not an exception in 2021 as the global economy increased by 5.9% in 2021 for the first time since 1973. Moldova, Ireland, Croatia, Montenegro and Turkey outperformed Georgia in terms of the economic growth rate but eventually Georgia’s economic growth was still higher as compared to majority of other states.

A strong economic growth rate was more unexpected as compared to 2021. As of 24 February 2022, Georgia was no longer energy dependent on Russia. In particular, the country produced 89% of its electricity needs and purchased over 92% of natural gas from Azerbaijan. These circumstances rendered energy blackmail from Russia impossible. In line with Georgia’s manifested position, it neither violates international sanctions imposed against Russia nor joins them and the country continues trade with Russia as usual in 2022. Russian nationals also used the visa-free travel opportunity. The total number of visitors to Georgia increased by 173% as compared to 2021 whilst the number of visits by Russian visitors skyrocketed by 410%. There was also a record 403% growth of remittances from Russia.

Not every country has published their statistical data for 2022 as of 1 February 2023. However, the situation is clear based on the preliminary information that the global growth rate was much lower as compared to 2021. Therefore, Georgia will take a higher position in terms of economic growth indicators. According to the initial assessment of the World Bank, the global economy increased by 2.9% in 2022 but Armenia had higher economic growth than Georgia at 10.8%.

Graph 1: Georgia’s Economic Growth Rate

Source: National Statistics Office of Georgia

If the GDP growth rate had been 5% annually in 2020-2022, the real economy would have increased by 15.8% as compared to 2019. Now the growth is 13.4%. Two consecutive years with double-digit economic growth turned out to be insufficient in order to catch up with the basic scenario, albeit the difference reduced to a minimum in 2022.

As compared to 2021, export in 2022 increased sharply by 31.8% and reached USD 5.593 billion. In this part, Lasha Khutsishvili’s statement is absolutely true, although of note is that net export (export minus import), instead of export separately, is used for GDP calculation and the Minister did not raise this issue. In the same 2022, import rose by 33.2% to USD 13.450 billion. The negative trade balance was USD 5.857 billion in 2021 whilst in 2022 it increased to USD 7.857 million. Despite the growth of the trade deficit, export growth is in any case positively reflected on GDP growth. At the same time, import growth was in some cases related to export growth. In 2022, the import of small cars increased by nearly USD 700 million to USD 1.6 billion but in the same period the re-export of small cars increased by USD 450 million to USD 900 million.

Lasha Khutsishvili’s statement is also true in regard to tourism. As reported by the Georgian National Tourism Administration, although the recovery in the number of visits of international visitors was only 61% as compared to 2019 (there were 7.726 million visits in 2019 as compared to 4.704 million visits in 2022), revenue from international travel (the number of international travellers) dropped further by 42% from 9.358 million in 2019 to 5.427 million in 2022 whilst revenues exceeded those of 2019 by 7.6% and reached USD 3.517 billion (the National Tourism Administration takes the number of tourists from the Minister of Internal Affairs’ Analytical Department and the amount of revenues from the National Bank’s data). This means that any individual who came to Georgia, irrespective of his status of an international traveller, a visitor or a tourist, spent more as compared to 2019. In 2019, one international traveller spent USD 349 on average and in 2022 this increased by 86% to USD 648. Such growth can be explained by two major reasons: 1) high inflation – consumer prices in 2022 increased by 29% as compared to 2019 and 2) the duration of the stay in Georgia because each visitor on average stayed one more day in 2022 than in 2019. In January-October 2022, as compared to the same period of 2019, travel revenues increased by 34.7% from GEL 2.689 billion to GEL 3.088 billion.

Graph 2: International Travel Revenues (USD Million)

Source: National Bank of Georgia

Overall, based on figures, the statement in of the Minister of Finance is accurate in all three components: the economy has indeed recorded double-digit growth for two consecutive years, the export growth rate exceeded 30% and the country earned more tourism revenues in 2022 as compared to 2018. However, as opposed to the results, the Minister did not speak about reasons behind these results and he failed to mention the 2020 economic downturn and the record growth of remittances in 2022. Therefore, FactCheck concludes that Lasha Khutsishvili’s statement is MOSTLY TRUE.