Irakli Gharibashvili: “Foreign direct investments have doubled.”

Verdict: FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.

Resume:

In the first three quarters of 2022, USD 1.676 billion in foreign direct investments were made in Georgia which is 102% more as compared to the same period of 2021. However, if we take the pre-pandemic (2019) figure as a base period instead of the pandemic period, which is objectively a more proper method for measuring, the growth rate will be 72%.

Irakli Gharibashvili correctly highlights a positive trend about foreign direct investments. However, the Prime Minister portrays the results with a certain exaggeration by selecting 2021 as a comparison year and without underlining the effect of the pandemic. Therefore, FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.

Analysis:

Prime Minister Irakli Gharibashvili, in his speech at World Government Summit in Dubai, made the following statement about investments: “There was a significant growth in foreign direct investments in 2022 as well which doubled as compared to the previous years and basically increased by 101.7%.”

As of February 2023, data for only three quarters are available. In January-September 2022, USD 1.676 billion was invested in Georgia whilst it was USD 831 million in the same period of 2021. Therefore, the FDI growth rate indeed reached 101.7% in one year. Statistics for the whole of 2022 will be available in March. Since the data for first nine months of 2022 already exceeded investment volumes in 2021 by 35%, we can currently say that the annual growth rate will also be substantial (theoretically, investment outflows may hinder growth although practically speaking, this is virtually ruled out). The proportion of growth is still unknown, although growth in the first quarter of 2022 was 330% as compared to the first quarter of 2021. It was 10% in the second quarter and 99% in the third quarter.

The Prime Minister did not specify an exact period for his comparison and only mentioned “previous years.” The FDI growth rate is even higher when compared to the first three quarters of 2020 and amounts to 134%. However, comparison with 2020 figures is less relevant in view of the pandemic suspended economic activity.

If we take the pre-pandemic 2019 as a base period, the FDI growth rate for the first three quarters of the year will be 72%. In January-September 2019, USD 974 million in foreign direct investments were made in Georgia.

As it stands, investments in 2022 (the first three quarters) are among record high figures. The previous record – USD 1.450 billion – was registered in 2017 and surpassed 2022’s by 18%.

Graph 1: Foreign Direct Investments in the First Three Quarters of 2011-2022 (USD Million)

Source: National Statistics Office of Georgia

In January-September 2022, the largest amount of investments made in Georgia (USD 364 million) came from Spain. The UK is the second largest investor with USD 275 million followed by the Netherlands with USD 125 million in investments. Investments from Ireland amounted to USD 120 million and those from the US totalled USD 103 million thereby putting the US last among the top five investment partners.

In terms of sectors, total investments in real estate during the first three quarters of 2022 reached USD 418 million and investments in the finance and insurance sector amounted to USD 324 million followed by investments made in art, entertainment and leisure (includes gambling) at USD 159 million.

In the first quarter of 2022, the reinvestment to the total investment ratio was 55%. It grew to 68% in the second quarter and declined to 60% in the third quarter. For the total FDI over the course of the first three quarters of 2022, the reinvestment share was 60%, equity capital was just over 34% and debt obligations were nearly 6%.

Even if the total FDI (four quarters) made in Georgia in 2022 exceeds 2017’s figure, which is very likely to happen, the record year of 2007 in terms of the FDI to the GDP ratio will still not be broken. In 2007, FDI accounted for 18.6% of the GDP and the same proportion would have been achievable in 2022 if FDI were USD 4.6 billion. In 2017, investment accounted for 11.8% of the GDP and the same proportion for 2022 would have been USD 2.8 billion FDI which is also very unrealistic for a USD 24.7 billion economy (Ministry of Finance’s preliminary assessment for 2022).

If we take the year 2021 from the Prime Minister’s “previous years” mention, his statistics (a 101.7% growth in investments) will be accurate. If we pick 2020, the growth rate will be even higher at 134%. In the case of the pre-pandemic 2019, the growth rate will be 72%. Although the investments have not doubled as compared to the pre-pandemic period, a 72% growth is still a substantial rise. FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.


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