Ministry of Economy: “Trade turnover with Azerbaijan exceeded USD 1 billion in the past ten months whilst investments surged by 3,108% in 2023.”

Verdict: FactCheck concludes that the Ministry of Economy’s statement is HALF TRUE.

Exports with Azerbaijan totalled USD 611 million, whilst imports amounted to USD 458 million, with the trade turnover constituting USD 1.07 billion from January to October in 2024. Although surpassing the USD 1 billion mark was portrayed as an achievement in the Ministry’s statement, trade turnover between the two countries had already surpassed the aforementioned level in the same periods of 2022 and 2023. Furthermore, exports even saw a decline of USD 103 million in January-October 2024 whereas imports decreased by USD 59 million.
Regarding investments, USD 3.4 million flowed from Azerbaijan to Georgia in 2022 with the figure surging by 2,580% to USD 90 million in 2023. Despite the percentage growth rate being exaggerated,[1] the key issue does not lie here. The 2,580% growth represents a substantial growth; however, this growth stemmed entirely from the low base figure in 2022. Investments from Azerbaijan dropped to nearly zero in 2022, subsequently making the percentage increase in 2023 appear large when compared to such reduced numerical data.
The Ministry of Economy’s statement presented the foreign trade figures in monetary terms without comparing them to the previous year whilst analysing investments in percentage terms. Phrases such as “more than USD billion” and “more than 3,018%” create an impression of significant success. However, these figures are manipulative as although trade turnover indeed exceeded USD 1 billion in the first ten months of 2024, in reality, it declined by USD 162 million as compared to the same period last year. Moreover, the high percentage growth of investments is due to the base effect and the percentage increase in investments is 2,580%, rather than the cited 3,018%.
Given the more-or-less accurate data but the omission of several crucial factors, FactCheck concludes that the Ministry of Economy’s statement is HALF TRUE.

Analysis

Whilst covering Minister Levan Davitashvili’s working visit to Baku, the Ministry of Economy and Sustainable Development stated: “The bilateral trade turnover between Georgia and Azerbaijan exceeded USD 1 billion from January to October 2024, making Azerbaijan Georgia’s sixth-largest trading partner and the third-largest export market. Additionally, investments from Azerbaijan in the Georgian economy have been exhibiting a substantial upward trajectory with a 3,018% rise recorded in 2023 as compared to the previous year.”

The main export product from Georgia to Azerbaijan is light vehicles. However, passenger cars are re-exports for Georgia as they are not domestically produced. Whilst re-exports are economically beneficial, exports of locally produced goods are more significant. A total of USD 114 million came from local exports whereas re-exports accounted for USD 497 million of the total USD 611 million in exports recorded from January to October 2024. Total exports decreased mainly due to a decrease in in re-exports which fell from USD 591 million to USD 497 million as compared to the same period in the previous year. However, local exports also saw a decline of USD 8 million from USD 122 million to USD 114 million.

Azerbaijan was Georgia’s top export partner from 2010 to 2015 due to the large volume of light vehicle exports. However, Baku introduced tighter regulations by implementing the EURO 4 standard in April 2024, resulting in a decline in automobile exports to Azerbaijan and, subsequently, in Georgia’s total exports. Despite the aforementioned decrease, Azerbaijan remained one of Georgia’s key trade partners. Azerbaijan ranks third amongst Georgia’s export destinations and sixth in both imports and total trade turnover as of January-October 2024. Additionally, only Kyrgyzstan and Kazakhstan surpass Azerbaijan in Georgia’s export partners, primarily due to passenger car exports.

Whilst Azerbaijan no longer ranks first in Georgia’s export partners, it still holds the leading position when analysing the period from 1995 to 2023 as a whole with a total of USD 7.6 billion in exports. This figure is USD 2 billion higher than exports to Russia, which ranks second, USD 2.6 billion more than that to Armenia, ranking third and USD 2.8 billion more than that to Turkey in the fourth place.

Graph 1: Exports to Azerbaijan

Source: National Statistics Office of Georgia

Imports from Azerbaijan have also decreased over the ten-month period. Georgia imported products worth USD 517 million from Azerbaijan in January-October 2023 with the figure dropping to USD 458 million in the same period in 2024.

The decline in trade turnover was primarily due to reduced trade of passenger cars and natural gas. Georgia sold light vehicles worth USD 254 million in the first ten months of 2024, representing a decline of USD 118 million as compared to the same period the previous year, whilst natural gas imports decreased by USD 67 million, totalling USD 182 million.

Graph 2: Trade Turnover with Azerbaijan from January to October (USD Million)

Source: National Statistics Office of Georgia

Trade turnover exhibited an upward trend which was primarily driven by exports following the three years after the pandemic. However, this growth shifted to a decline in 2024.

The second part of the Ministry’s statement addressed investments. Growth of 3,000% is significant and such large increases are typically due to the base effect. Whilst investments from Azerbaijan to Georgia amounted to USD 3.4 million in 2022, they surged to USD 90 million in 2023, representing a 2,580% increase. Despite an impressive percentage increase, it is driven by the base effect. Azerbaijani investments in 2022 were almost negligible; however, even with the significant rise in 2023, investments did not reach the levels recorded from 2014 to 2018. Furthermore, there are no signs of recovery in 2024 as only USD 36 million in investments have been recorded in January-June.

Graph 3: Foreign Direct Investment from Azerbaijan

Source: National Statistics Office of Georgia

The aforementioned decline in investments is linked to the completion of large-scale projects. Notably, the Kars-Akhalkalaki railway construction and the expansion of the Shah-Deniz gas pipeline were underway during the years when Azerbaijani investments in Georgia peaked.

The Ministry of Economy’s statement presented the foreign trade figures in monetary terms without comparing them to the previous year whilst analysing investments in percentage terms. Phrases such as “more than USD billion” and “more than 3,018%” create an impression of significant success. Whilst the foreign trade figures are accurate, the investment levels are exaggerated, likely due to the inaccurate preliminary data from March that has not been updated. However, the key issue is the manipulation of the aforementioned numbers. Trade turnover has actually decreased – declines have been observed in local exports, re-exports and imports. Furthermore, the four-digit percentage increase in investments was due to the base effect. Given the more-or-less accurate data but the omission of several crucial factors, FactCheck concludes that the Ministry of Economy’s statement is HALF TRUE.