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Levan Davitashvili: “In the first three quarters [of 2022], FDI amounted to USD 1.7 billion which is a record high figure. The sovereign rating outlook, assigned by Fitch, has also improved.”

Verdict: FactCheck concludes that Levan Davitashvili’s statement is MOSTLY TRUE.

Resume:

According to the statement of the Minister of Economy and Sustainable Development, Levan Davitashvili, total foreign direct investments to Georgia in the first three quarters of 2022 reached USD 1.7 billion whilst Fitch affirmed Georgia’s sovereign rating at BB although improved the outlook to “positive.”

Total foreign direct investments in January-September 2022 reached USD 1.7 billion. Therefore, FDI attracted in 2022 can possibly be a “record high” in terms of absolute numbers when it comes to yearly indicators and is definitely a “record high” in terms of the first three quarters of the year. However, there are at least two years (2007 and 2017) with better results in terms of the FDI to GDP ratio which the Minister omitted when assessing Georgia’s success. In regard to Georgia’s sovereign rating, Fitch affirmed Georgia’s sovereign rating unchanged at the BB level in its latest report (January 2023), although changed the “stable” outlook to “positive.” This assessment is the best that Georgia has ever had. Therefore, FactCheck concludes that Levan Davitashvili’s statement is MOSTLY TRUE.

Analysis:

On 6 February 2023, the Minister of Economy and Sustainable Development, Levan Davitashvili, summarised 2022 at a briefing and overviewed a few economic indicators. Speaking of foreign direct investments, Minister Davitashvili stated: “There was a record high volume of foreign direct investments and we talked about that. The aggregate figure for the first three quarters of 2022 is USD 1.7 billion and we are looking forward to see the eventual figure over two; that is, over USD two billion for a year. This was also a record high. There was a significant growth not only as compared to 2021 but a rather substantial rise as compared to 2019 as well.” Later, speaking on the sovereign rating, he added: “All of these [economic growth, investment growth, export growth, cargo turnover growth, energy generation growth, reduction of current account deficit, reduction of the unemployment rate, beginning to reduce inflation] were, of course, reflected on our sovereign rating and as you know, Fitch recently affirmed our sovereign rating at BB but improved our outlook to positive.”

FactCheck verified the data about investments and sovereign ratings from Levan Davitashvili’s statement.

Foreign direct investments in January-September 2022 reached USD 1.676 billion. Preliminary information about the fourth quarter and the entire 2022 will be published in March 2023. However, it can be said with confidence that total FDI for the first three quarters of 2022 in absolute figures is indeed a “record high” and 102% higher as compared to the same period of 2021, 72% higher as compared to the same period of the pre-pandemic 2019 and 16% higher as compared to the “record” registered in 2017.

These figures provided by the Minister are correct when measured in absolute values. However, Levan Davitashvili overlooked the FDI to the GDP ratio which is an important indicator particularly when highlighting “record high” results.

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

Source: National Statistics Office of Georgia

Since a resource of identical value can be very large for a smaller economy but small for a bigger economy, it is more relevant to analyse the investments to the GDP ratio to make a comparison. In any particular economy, the “success” of attracting FDI should be measured against the size of that particular economy.

A total of USD 1.765 billion in FDI was invested in Georgia in 2007 which amounted to 18.6% of Georgia’s GDP at that time whilst 18.6% of Georgia’s 2022 GDP (USD 24.7 billion according to preliminary assessment) is USD 4.6 billion. Theoretically, nearly USD 3 billion in investments should have been made in the fourth quarter in order to achieve the same ratio, something which seems virtually impossible. Moreover, in order to reach an 11.9% FDI to GDP ratio which was registered in 2017, an additional USD 1.2 billion in investments are needed, something which is also less realistic. The Minister himself noted that annual investment figures would probably exceed USD 2 billion, although he did not say that it would reach USD 3 billion.

Therefore, FDI attracted in 2022 can possibly be a “record high” in terms of absolute numbers when it comes to yearly indicators and is definitely a “record high” for the first three quarters of the year. However, there are at least two years (2007 and 2017) with better results in terms of the FDI to the GDP ratio which the Minister omitted when assessing Georgia’s success. As a result, this part of Levan Davitashvili’s statement can be assessed as HALF TRUE.

In regard to the situation in terms of credit ratings, Fitch assessed Georgia’s credit rating in January 2023 and left it unchanged at BB. However, Fitch improved Georgia’s outlook as compared to August 2022 and changed it from stable to positive. Georgia earned a BB- rating from Fitch as early as July 2007, although after the Russo-Georgian war, the rating dropped (B+) and only returned to BB- in 2011. Georgia’s credit rating became BB only in 2019 and this is the first time when country had a BB rating with a positive outlook. According to Fitch’s rating scale, any rating below BBB- is considered as a non-investment grade. Therefore, despite the rating not being favourable, Fitch’s assessment is still the best that Georgia has ever had. Consequently, this part of the Minister’s statement can be assessed as TRUE.


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