Irakli Kobakhidze: “Georgia’s economy has doubled in when measured in USD over the past four years.”
Verdict: FactCheck concludes that Irakli Kobakhidze’s statement is HALF TRUE.
Georgia’s GDP per capita measured in USD totalled USD 4,400 in 2020 and had increased 2.1 times to USD 9,140 by 2024. However, these figures have three major issues: the base year, as the comparison is made with the pandemic year of 2020 when the economy shrank by more than 6%; ignoring inflation, as the comparison is made in current rather than constant prices, and the exchange rate effect as depreciation and appreciation distorts the data. The GDP should be measured in the national currency – in Georgia’s case, GEL.
When calculated in local currency at 2019 constant prices, the GDP per capita increased by 46% from GEL 12,250 in 2020 to GEL 18,270 in 2024 and by 34% from GEL 13,665 in 2019 to GEL 18,270 in 2024.
Whilst the GDP per capita in current USD has indeed doubled in four years, real GDP per capita has increased by only 34% over the past five years. Despite the formal accuracy of the presented figures, the omission of several important factors created the misleading impression that real growth was three times higher than it actually was. Considering all the above, FactCheck concludes that Irakli Kobakhidze’s statement as HALF TRUE.
Analysis
During his visit to the Public Broadcaster’s show, Aktualuri Tema, whilst commenting on the economy, Irakli Kobakhidze stated: “Our economy has been growing rapidly over the past four years. Georgia’s economy per capita has doubled when measured in USD – and increased even more.”
Georgia’s GDP per capita in USD totalled USD 4,300 in 2020 and had increased 2.1 times to USD 9,140 by 2024. However, these figures have three major issues:
- The pandemic year of 2020 was impacted by economic contraction. A more appropriate base year for comparison would be either 2019 or 2021.
- Consumer prices in Georgia rose by a cumulative 27% from 2021 to 2024 which affected nominal growth figures. The GDP should be measured in constant prices to assess the real picture.
- GEL is the country’s legal payment mode. Unless comparing with another country’s economy, the GDP should be measured in GEL – not in a foreign currency.
Georgia’s economy shrank by 6.3% in 2020 due to the pandemic and COVID-related restrictions – the sharpest decline since 1994. The total economy in USD fell from USD 17.6 billion to USD 16 billion whilst the GDP per capita decreased from USD 4,740 to USD 4,300. As a result, although nominal growth over four years reached 112%, the five-year increase amounted to 93%.
Graph 1: GDP Per Capita in Current Prices (USD)
Source: National Statistics Office of Georgia
Even excluding the pandemic year, a 93% rise over five years would still represent an exceptional result. However, there is another issue – inflation. Thus, the GDP must be measured in constant prices. GeoStat calculates the GDP in constant 2019 prices but only in GEL. Although the World Bank also provides constant-price data in USD, 2024 figures are not yet available.
Georgia’s GDP per capita increased by 33% from USD 4,660 in 2020 to USD 6,180 in 2023 and by 24% from USD 4,980 in 2019 to USD 6,180 in 2023 when measured in 2015 constant prices. Over the same period, nominal growth reached 93% from 2020 to 2023 and 75% from 2019 to 2023. Whilst 2024 data is not yet available, the gap between real and nominal growth in previous years clearly illustrates the difference.
Graph 2: GDP Per Capita in Current and Constant Prices (USD)
Source: World Bank
The impact of the exchange rate is disregarded when the GDP is calculated in current prices and in a foreign currency. This can lead to a distorted picture of economic growth – sometimes appearing overstated and other times understated. There have been cases where the real economy grew but the GDP measured in USD declined due to the depreciation of GEL. For instance, the economy grew by 3.5% in 2015 but the GDP per capita declined by 15% – from USD 4,830 to USD 4,090. Despite a 6.1% real growth in 2019, the GDP per capita still fell by 1.3% – from USD 4,800 to USD 4,740. Hence, it would be incorrect to claim that the economy shrank by 15% in 2015 or 1.3% in 2019 based solely on these figures. Similarly, it is misleading to assert that the economy grew by 32% in 2022 and 23% in 2023.
If we want to understand the growth in the GDP per capita over a certain period, it must be calculated in constant prices and in the national currency.
Graph 3: GDP Per Capita in Current and Constant Prices (GEL)
Source: National Statistics Office of Georgia
The GDP per capita increased by 46% from GEL 12,250 to GEL 18,270 between 2020 and 2024 and by 34% from GEL 13,665 to GEL 18,270 between 2019 and 2024 when measured in constant 2019 prices.
Whilst Irakli Kobakhidze named the reporting currency, he did not mention that the GDP was calculated in current prices. Presenting statistics only in current prices created the impression that the economy had doubled in four years whereas in reality it expanded by 34% over five years. The first scenario requires an average annual growth of 19% whilst the second implies a 6% annual growth. Irakli Kobakhidze practically exaggerated the real economic growth rate threefold (even assuming 2020 is a relevant baseline, the growth is still overstated twofold). Despite the formal accuracy of the presented figures, the omission of several important factors created the misleading impression that real growth was three times higher than it actually was. Considering all the above, FactCheck concludes that Irakli Kobakhidze’s statement as HALF TRUE.
