Irakli Gharibashvili: “According to the Heritage Foundation’s Economic Freedom Index, Georgia is ranked in the 21st position in Europe and is ahead of 11 EU member states.”

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

The Heritage Foundation measures an economic freedom index across the world’s 180 countries with 12 parameters. In its 2023 report, Georgia is ranked 35th in the world and in the 21st position in Europe belonging to the group of moderately free countries which is line with the Prime Minister’s figures.

Despite a more or less good position in the ranking, there is a visible deterioration dynamic to which Irakli Gharibashvili did not pay attention. In 2021, Georgia was ranked 12th in the world and 7th in Europe and was in the group of mostly free countries. At the same time, the decrease in the nominal points is largely precipitated to the government’s increased role amid the pandemic which negatively affected freedom and, therefore, caused a loss of points for other countries as well. In the case of Georgia, this also resulted in losing positions in the ranking which means that the deterioration was higher in our case as compared to other countries. The reforms undertaken for the improvement of legislation as a part of Georgia’s commitments arising from the DCFTA also contribute to the drop in points.

The Prime Minister’s statement is formally accurate as Georgia is indeed ranked 21st in Europe and is ahead of 11 EU member states. However, taking into account the drop in 14 positions over the last two years in Europe (losing 23 positions in the world) and decrease in ranking points, FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.

Analysis

The Prime Minister, Irakli Gharibashvili, delivered a speech at Silk Road Forum held in Tbilisi in October, speaking about different rankings and indexes including the state of economic freedom, and stated: “According to the Heritage Foundation’s 2023 Economic Freedom Index, Georgia is ranked 21st in Europe and is ahead of 11 EU member states.”

The Heritage Foundation measures the index of economic freedom in 180 countries of the world with 12 parameters divided into four groups. Each parameter is rated from 0 to 100 points where 0 is the worst and 100 is the best. The 2023 report analyses the period from July 2021 to July 2022. The fund mainly analyses the studies of the World Bank, the International Monetary Fund and other international financial institutions. In turn, international financial research institutes conduct research based on local central banks and statistical services.

As of 2023, Singapore is ranked the first with 83.9 points whilst North Korea takes the last 176th place with 2.9 points. Georgia, with its 68.7 points, is ranked 35th in the world and 21st in Europe.

Georgia is ahead of the following 11 EU member states in the ranking: Slovenia, Poland, Malta, Belgium, Croatia, Spain, Romania, Hungary, France, Italy and Greece.

In the general ranking for 2023, Georgia ended up in the group of moderately free countries with the 35th position. In 2022, Georgia was ranked 26th and was categorised as part of the mostly free countries, similar to 2020-2021 when it was ranked 12th.

Table 1: Georgia in the Heritage Foundation’s Rankings

Source: Heritage.org

After 2007, Georgia had its worst performance in 2023 both in terms of the ranking position and the points. In the last two years, Georgia’s position worsened by 23 positions and 8.5 points.

As compared to 2022, eight of Georgia’s 12 parameters worsened, two parameters improved and two parameters maintained their points in 2023.

Table 2: Georgia in the Heritage Foundation’s Survey

Source: Heritage.org

The largest drop is observed in the fiscal health and property rights elements whilst there is also a significant improvement in terms financial freedom and some small progress in terms of labour freedom. Fiscal health points were negatively affected by the rising government debt after the pandemic and the government’s increased involvement in economic activities.

It is noted in the survey that the rule of law is more or less well protected in Georgia and property rights are also higher than the world average. According to the report, regulations are flexible and prices are mostly determined by the market. The economic part is based on the data from 2021, the budget deficit is 5.7%, inflation is 9.6% and the government debt is estimated at 49% of the GDP.

Georgia had the best score in the 2021 report since then the deterioration of the rating has deteriorated in almost every aspect.

The drop in the points is partly related to the pandemic and COVID-regulations (the survey is based on the analysis of the data of the previous period). For the same reason, most other countries have also witnessed a decrease in their points.

The loss of points can also be explained by the obligations under the EU-Georgia Association Agreement. In 2014, Georgia agreed to harmonise the national legislation with the European Union legal framework in exchange for free trade and subsequent visa-free travel which in turn meant the adoption of certain regulations and the tightening of existing regulations. However, this circumstance is only a part of the full picture. Six out the top ten countries of the survey: Ireland, Estonia, Luxembourg, the Netherlands, Denmark and Sweden are members of the European Union. Switzerland, which is not a member of the Union but is part of the Schengen area, is ranked the second and is only 0.1 of a point behind Singapore. Norway, known for its high taxes and regulations, ranks 12th, Germany 14th and the loss of points in property rights (including intellectual property) and judicial effectiveness cannot be attributed to the Association Agreement.

The size of the regulations in the European Union is, in most cases, higher than today in Georgia. Some of them were adopted individually at the level of states and some are common European regulations. Getting closer to Brussels in the future will oblige Georgia to adopt additional regulations which may lead to a loss of points in several cases and only the loss of points in the overall rating will further worsen Georgia's position if the situation in other areas does not improve.

Despite losing positions, Georgia is still significantly ahead of the neighbouring states. As of 2023, Armenia is in the 50th position, Azerbaijan is in 75th, Turkey is in 104th and Russia in 125th.

Ultimately, it is possible to say that according to the Heritage Foundation’s Economic Freedom Index, Georgia is indeed in the 21st position in Europe (35th in the world) and is ahead of 11 EU member states. However, the downward dynamic is of necessary mention. In particular, in the last two years, Georgia lost 23 position in the world and 14 positions in Europe. Given the accurately stated ranking position and the worsening trend, FactCheck concludes that Irakli Gharibashvili’s statement is HALF TRUE.