Irakli Gharibashvili: “The inflation rate is less than 1%.”
Verdict: FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.
Inflation can be measured by various methods: as compared to the same period of the previous year (month against month, quarter against quarter), from the beginning of the year until the reporting period, the average of the previous months and the average of the last 12 months as compared to the average of the previous 12 months. It is also possible to make a comparison with the previous months for some purposes which can only be relevant for certain types of products given the seasonal factor.
In September 2023, inflation reached 0.7% as compared to the same period of the previous year. The inflation rate was less than 1% in June-August as well, although the general price level growth in January-September reached 3.3% since inflation in the first quarter was above 7%. The price level growth rate was also higher in the fourth quarter of 2022 and the average inflation of the last 12 months amounted to 4.9%.
The Prime Minister supposedly was referring to the 2023 September inflation rate as compared to the inflation rate in September 2022. Statistical data, taken separately, are true when it comes to September 2023, although the inflation rate for the first nine months of 2023 is 3.3% which means it is 3.3 times larger than the Prime Minister’s figure. At the same time, of note is that the 3.3% inflation rate is largely stipulated by the relatively higher inflation rate at the beginning of the year whilst the trend from the second half of 2023 proves that inflation has been decreasing. Therefore, FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.
Analysis
The Prime Minister of Georgia, Irakli Gharibashvili, in his speech at the Silk Road Forum when he was talking about the economic indicators, stated: “The inflation rate is less than 1%.”
Georgia is part of the global economy and processes unfolding in the world affect almost everything, including consumer price growth. Inflation is additionally affected by higher import-dependency.
Price stability is the key objective of the National Bank of Georgia (Article 3). “Stable prices” does not mean freezing them at one point as the target inflation rate is 3%. In 2019-2022, inflation could not be contained within the target rate for four consecutive years.
The year 2019 was distinguished by a growth of food prices. In these 12 months, the prices in this group increased on average by 8.2% which significantly affected the overall inflation.
In 2020, the pandemic disrupted supply chains. The fall in prices of energy carriers and the artificial reduction of demand offset inflationary processes to a certain extent. However in total, annual inflation again turned out to be higher as compared to the target figure.
In 2021, in light of lifting the COVID-regulations and the demand recovery, the price growth rate accelerated in the whole world, including Georgia. At the end of 2021, the inflation rate in Georgia reached 13.9% and the annual inflation rate rose to 9.6%. Had the Government of Georgia not subsidised utility bills (in January-February), the annual inflation rate would have reached double-digits.
Graph 1: Annual Inflation Rate
Source: National Statistics Office of Georgia
In 2022, it was expected that the inflation rate would decrease globally, although Russia’s invasion of Ukraine caused another disruption of supply chains and a sharp growth in prices of energy carriers which resulted in the price growth rate reaching a decades-long record high in some countries. In Georgia, the annual inflation rate reached 11.9% for the first time since 1999.
In 2023, the impact of external factors decreased. In the first nine months of the year, the price growth rate decreased to 3.3%. From June to September, the annual inflation rate fell below 1% in four consecutive months, all of which raises expectations that inflation may return to the target range by the end of the year.
Graph 2: Annual Inflation (Months as Compared to Previous Months)
Source: National Statistics Office of Georgia
On the one hand, a substantial decrease in inflationary processes is evident and it returned to a single-digit percentage figure from December 2022 whilst it fell below 3% from April and below 1% from June. On the other hand, without providing specifics, the inflation rate for one particular month or even four months may lead to a wrong interpretation. In the last 12 months, the average inflation was 4.9% as compared to the previous 12 months and the average inflation for January-September 2023 was 3.3%.
As the Prime Minister did not specify the period, the figure in his statement created a possibility to misrepresent the reality. However, of note is that the 3.3% inflation figure is stipulated by a comparably higher inflation at the beginning of this year and trends show that the inflation rate is going down in the second half. As a result, FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.
