Irakli Gharibashvili: “The country’s economy as a whole and the income per capita are at a historic high.”

Verdict: FactCheck concludes that Irakli Gharibashvili’s statement is a MANIPULATION.

Resume: The statistical data provided by the Prime Minister is nominally accurate both when calculated in the national currency and in USD, although the context also needs to be taken into account. Apart from a few exceptions, almost all countries across the world have their economies and income per capita at a historic high. Even in the case of a minimal economic growth, the real economy of each subsequent year will be at a historic high. This is simply a mathematical rule and not something extraordinary. In regard to the nominal economy, it can grow at the expense of inflation even under an economic recession.

Since any slight growth of the economy brings the statistical indicator to a record high and barring some exceptions a historic high is achieved every following year, Irakli Gharibashvili’s statement aims to aggrandize a perfectly ordinary event that this year’s economy is at a historic high and is something that warrants special mention. Therefore, FactCheck concludes that Irakli Gharibashvili’s statement is a MANIPULATION.

Analysis

On 3 April 2023 at the session of the Government of Georgia, the Prime Minister, Irakli Gharibashvili, made an overview of the economic parameters and stated that the income per capita was at a historic high. In particular, the Prime Minister stated (from 4:46): “The gross domestic product and the economy as a whole are at a historic high as well as being a historic high when calculated per capita which will be USD 8,000 already this year.”

Despite difficult social problems in general, there were only two cases in Georgia since 1994 when the GDP actually decreased. It happened for the first time in 2009 when Georgia’s economy contracted by 3.7% in light of Russia’s invasion and the global economic crisis. The second time was in 2020 owing to the pandemic and the stringent COVID regulations when the economy decreased by 6.8%. In all other cases, the GDP was always increasing, albeit sometimes to a slight extent, even when GEL depreciated and the unemployment rate rose.

Graph 1: GDP Growth Rate

Source: World Bank

The nominal economy, especially if it is measured in a foreign currency, does not show an accurate picture. Inflation and exchange rate changes distort the reality. As a result of exchange rate changes, the Georgian economy measured in USD decreased by 4% in 2020 as compared to 2012 from USD 16.5 billion to USD 15.8 billion whilst when measured in GEL, it increased by 81% from GEL 27.2 billion to GEL 49.3 billion. There were a few instances when the GEL-calculated nominal GDP increased and the USD-calculated one decreased. In fact, Georgia’s economy increased by 24% during this period but GEL lost 98% of its value vis-à-vis USD from 1.66 to 3.28 which was abetted by a 30% growth in consumer prices.

If the GEL depreciation led to an artificial shrinking of the USD-measured nominal GDP, GEL appreciation in 2021 and, particularly, in 2022 shows the GDP growth to be higher than it actually is. In 2022, GEL appreciated by 12.5% and the value of USD dropped by GEL 0.39 from GEL 3.09 to GEL 2.70. At the same time, the inflation rate reached 11.9%. As a result, if a real economic growth was 10.1%, the nominal growth in GEL was 19.6% from GEL 60 billion to GEL 71.8 billion and 32.2% in USD from USD 18.6 billion to USD 24.6 billion.

Graph 2: Nominal GDP (GEL Billion and USD Billion)

Source: National Statistics Office of Georgia, World Bank

Usually, the income per capita also rises when the whole economy increases. The exception can be the case when the population increases very rapidly. Georgia’s population, however, has been declining. As reported by the National Statistics Office of Georgia, Georgia’s population was 3.718 million as of 1 January 2023 whilst– it was 3.688 million as of 1 January 2022. In 2022, the number of deaths exceeded the number of live births by 6,799. Migration figures have not yet been published, although in the history of modern Georgia it was always negative except for 2020. Therefore, in light of the country’s declining population, the growth of income per capita cannot be considered as an additional achievement.

The income per capita figure is significantly affected by the inflation rate and changes in exchange rate. In regard to this parameter, the Prime Minister’s claim of a “historic high” is literally accurate and the USD 8,000 estimate is also almost accurate (officially, the Ministry of Finance forecasts it at USD 7,916). However, there is another truth behind these numbers because if we measure the nominal GDP in current prices, it turns out that 2005 was a record year in terms of the income per capita, although it was merely USD 1,642. The next record was broken in 2006 and afterwards in 2007. On top of that, if we start measuring from 1995 when the economic downturn ended after the collapse of the USSR, 1996 would already be a record year. The record measured in constant prices was broken in 2007 and new records were broken annually except for 2009 and 2020.

Graph 3: GDP Per Capita

Source: World Bank

The World Bank has not yet published 2022’s data calculated in constant prices and so they cannot be compared to the GDP calculated in current prices.

Since any slight growth of the economy brings the statistical indicator to a record high and barring some exceptions a historic high is achieved every following year, Irakli Gharibashvili’s statement aims to aggrandize a perfectly ordinary event that this year’s economy is at a historic high and is something that warrants special mention. Therefore, FactCheck concludes that Irakli Gharibashvili’s statement is a MANIPULATION.

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