Irakli Kobakhidze: “We have expanded the economy by GEL 40 billion in the past four years.”
Verdict: FactCheck concludes that Irakli Kobakhidze’s statement is HALF TRUE.
The economy amounted to GEL 49.8 billion in 2020 whilst the projected value of the economy in 2024 constitutes GEL 87.7 billion. This figure could increase slightly due to the higher-than-projected growth rate of the gross domestic product.
The nominal economy will be at least GEL 38 billion higher by the end of 2024 than in 2020. However, two prominent issues arise: the base pandemic year and inflation as ignoring these factors can distort the reality.
The GDP decreased by 6.3% in 2020 due to COVID-19 regulations, resulting in factory shutdowns – marking the largest downturn since 1994. The double-digit growth observed in 2021 is largely attributed to the re-opening of the previously closed businesses.
Consumer prices have increased by more than 27% since 2020. Notably, the economy grew from GEL 63 billion to GEL 88 billion when measured in 2024 fixed prices.
Whilst the presented statistics are more or less accurate, two essential factors – the base pandemic year and inflation – were omitted from discussion. Thus, FactCheck concludes that Irakli Kobakhidze’s statement is HALF TRUE.
Analysis
During his visit to POSTV, Prime Minister Irakli Kobakhidze claimed (from 39:18): “Taking 2021, 2022, 2023 and 2024 data into account, we have managed to expand the economy by GEL 40 billion in the past four years.”
The Georgian economy amounted to GEL 49.8 billion in 2022 and GEL 80.2 billion in 2023 whilst the projected value for 2024 constitutes GEL 87.7 billion. However, this figure could indeed reach GEL 90 billion due to the higher-than-projected growth rate of the gross domestic product (the growth rate amounted to 9.8% over the nine-month period). Whilst the nominal values are accurate, this projection faces two issues: the base pandemic year and inflation.
The economy decreased by 6.3% in 2020, marking the largest downturn since the 1990s. Notably, the structural problems of the economy did not lead to the aforementioned decline; rather, it was the shutdowns in the accommodation, catering and retail industries. Furthermore, transportation was also halted. Subsequently, the re-opening of the recently closed factories led to growth in 2021.
Graph 1: GDP and GDP Growth Rate
Source: National Statistics Office of Georgia, Ministry of Finance
Georgia was no exception to the aforementioned trends. Whilst most European countries faced the largest downturns in 2020 since World War II and the US experienced its most significant decline since the Great Depression, the growth observed in 2021 marked historical highs of the previous decades.
The Georgian economy expanded by 10.6% in 2021 as compared to 2020 and by 3.6% as compared to 2019.
Inflation is another factor which could alter the perception of the reality. Although the economy decreased by 6.3% in 2020, the nominal GDP saw a slight increase from GEL 49.7 billion to GEL 49.8 billion.
The real economy increased by 32% from 2021 to 2023, marking a notably high growth for a three-year period. However, the growth of the nominal economy was twice larger, amounting to 61% (from GEL 49.8 billion to GEL 80.2 billion). This difference can be primarily attributed to inflation as consumer prices rose by 26% during the same period. The inflation rate amounted to 9.6% in 2021 and 11.9% in 2022, dropping sharply to 2.5% in 2023 and declining even further to 1% in January-October 2024. Despite the aforementioned improvements in the overall picture, the value of GEL 49.8 billion in 2020 is equivalent to GEL 63.2 billion today, suggesting that the real economy expanded from GEL 63 billion to GEL 88 billion, thus at a rate lower than that of the nominal figures (the Ministry of Finance’s projected indicator is used as the data for 2024 as the year is not yet complete).
Graph 2: GDP in Current and Constant Prices
Source: National Statistics Office of Georgia, Ministry of Finance
The growth rate of the real economy is even lower as compared to 2019. Adjusting for inflation, the economy measured in constant prices expanded from GEL 66 billion to GEL 88 billion from 2019 to 2024 which is only half of the growth figure presented by the Prime Minister.
Whilst the presented statistics are more or less accurate, two essential factors – the base pandemic year and inflation – were omitted from discussion. Thus, FactCheck concludes that Irakli Kobakhidze’s statement is HALF TRUE.
