Government of Georgia: “Exports increased to a record high in 2023.”
Verdict: FactCheck concludes that the information provided in the government report is HALF TRUE.
The foreign trade turnover reached USD 21.5 billion in 2023 which is 12.5% higher than the 2022 figure. During the reporting period, exports increased by 9% and imports increased by 14.1%.
In monetary terms, exports did indeed reach USD 6.1 billion, however, exports increase in monetary terms almost every year and, therefore, almost every year reach a record high. This is why another new record cannot be considered a major success.
The structure of exports is also important. In 2023, it increased entirely due to re-exports whilst domestic exports sharply decreased by 24% and fell below the 2021 level.
Considering the fact that whilst the monetary data are correctly stated, important circumstances are not mentioned which allows for the possibility of drawing false conclusions, FactCheck has assessed the information provided in the government report as HALF TRUE.
Analysis:
The report on the progress of the implementation of the government programme submitted to the Parliament, which covers the period from June 2023 to May 2024, contains a separate entry on exports in the economic review section (p. 73): "In 2023, the export of goods increased by 9.1 percent and reached a record USD 6.1 billion.”
Since 1995, when foreign trade statistics began to be recorded, there have been only seven instances of a decrease in exports, six instances of a decrease in imports and six instances of a decrease in total foreign trade turnover. During this time, the total trade turnover has increased 33 times (exports - 39 times, imports - 31 times). An increase in foreign trade turnover, without additional details, does not indicate a significant success.
When discussing exports, it is important to know what kind of exports have increased. Selling anything at a mark-up is always profitable but if that product is produced locally, it has more significance to the economy than re-exports.
In 2023, the increase in exports was entirely due to re-exports whilst local exports, on the contrary, sharply decreased by 24%, from USD 3.7 billion to USD 2.8 billion. This figure lags behind not only 2022 but also 2021.
Chart 1: Export Structure (USD Million)
Source: National Statistics Office of Georgia
Local exports have decreased for the first time since 2015. In 2020, even taking into account the pandemic crisis, there was a 4% increase in local exports despite a 12% decrease in total exports.
From 2014 to 2022, the share of re-exports averaged 31%.[1] In 2023, it exceeded 54%. Since Geostat started publishing re-export data separately, its share has not exceeded 40% in any single year up until 2023.
In 2023, local exports decreased by 24% whilst re-exports increased by 75%. In the first case, the reason for the decline was a decrease in demand and international prices for ferroalloys and copper ores. In the second case, re-exports were boosted by sales of light vehicles.
In 2022, ferroalloys valued at USD 460 million were exported whilst this figure was USD 181 million in 2023. Copper ore exports exceeded USD 1 billion in 2022 and decreased to USD 480 million in the following year. The export of nitrogen fertilizers also decreased sharply by USD 123 million. With just these three products, local exports decreased by a total of USD 947 million which is a significant amount for an economy the size of Georgia.
Chart 2: Local Exports (USD Million)
Source: National Statistics Office of Georgia
The increase in re-exports was almost entirely due to light vehicles. Whilst the share of car exports in total exports averaged 11% in 2015-2021, it reached 16% before Russia’s invasion of Ukraine in 2022 and 35% in 2023.
Chart 3: Car Export
Source: National Statistics office of Georgia
A total of 91% of car exports are distributed among four countries: Kyrgyzstan, Kazakhstan, Azerbaijan and Armenia. Russia's direct share is 3.2% but there is reason to believe that cars were entering Russia from Georgia through third countries. After the tightening of sanctions from September 2023, Georgia dramatically reduced car exports to Russia and gradually almost eliminated them. If in August 1,054 cars were exported to Russia, in September their number decreased to 85 and only three cars were sold in December. Car exports to countries other than Russia and Belarus are not restricted, therefore, even if some of the cars purchased from Georgia from these countries end up in Russia, this cannot be considered a violation of sanctions by Georgia.
Considering the increase in exports due to re-exports as an increase in exports, without explaining the reasons, provides incomplete information which may become the basis for drawing false conclusions. Therefore, FactCheck has assessed the information provided in the report on the progress of the implementation of the government programme as HALF TRUE.
