Resume:
Since October 2013 until October 2018, the nominal pension has increased by a total of GEL 30 (by GEL 10 and GEL 20 in 2015 and 2016, respectively) which is consistent with the figures given in the statement. The 2019 draft state budget envisions a GEL 20 increase in nominal pensions.
Since 2012 until 2016, the nominal pension growth rate exceeded the growth in consumer prices; that is, the real income of pensioners has increased. In 2017, inflation reached 6.7% which is the highest rate registered under the Georgian Dream’s rule. The pension did not increase in 2017-2018 and so the pension’s purchasing power has been constantly decreasing. The real income for pensioners dropped by 9% in the third quarter of 2018 as compared to the same period of 2016.
The inflation target for 2019 is 3%.As a result of the increase, the nominal pension will amount to GEL 200. If the real inflation matches the targeted figure, the real pension will be GEL 184 at the end of 2019 which will be GEL 4 more as compared to the same period of 2016. In other words, as a result of the GEL 20 increase in the nominal pension, a pensioner at the end of 2019 will be able to afford all of the same products which he could purchase with his pension at the end of 2016 with a surplus of GEL 4. Therefore, although inflation will not fully absorb the GEL 20 increase in pensions, the pension growth will be marginal as compared to 2016 and constitute only 2.2%.
Analysis On 12 October 2018, at the presentation of the 2019 draft state budget, United National Movement member, Otar Siradze, stated:
“In the last five years of the Georgian Dream’s rule, pension has increased twice, by GEL 10 in 2015 and by GEL 20 in 2016. In 2017 and 2018, when the inflation rate was the highest, pension did not increase and the 2019 draft state budget envisions only a GEL 20 growth which will not compensate for the rising prices. Inflation will eat the aforementioned pension increase and this increase is already being eaten.”
Given the sensitivity of social security and pension issues, they are often used for political speculations. Observing factual accuracy and consistency of analysis is of paramount importance in order to see the real picture.
Otar Siradze speaks about the period of the last five years. Considering the fact that pensions have been increasing over different periods of time, it is appropriate to analyse the changes since October 2013 until October 2018 (the last five years). In this period, nominal pension increased by a total of GEL 30 in 2015 and 2016 which is consistent with his statement. The 2019 draft state budget envisions a GEL 20 increase in nominal pensions.
Table 1:
Old Age Pension in 2010-2017
| I Quarter | II Quarter | III Quarter | IV Quarter | |||||
| Nominal Pension | Real Pension (2016=1) | Nominal Pension | Real Pension (2016=1) | Nominal Pension | Real Pension (2016=1) | Nominal Pension | Real Pension (2016=1) | |
| 2012 | 100 | 108.2 | 100 | 108.1 | 110-125 | 119.8-136.2 | 110-125 | 122.6-139.3 |
| 2013 | 110-125 | 121.5-138.1 | 125 | 134.8 | 125 | 137.92 | 150 | 163.33 |
| 2014 | 150 | 160.1 | 150 | 158.5 | 150 | 158 | 150 | 160.2 |
| 2015 | 150 | 156.1 | 150 | 151.7 | 160 | 160.2 | 160 | 162.9 |
| 2016 | 160 | 160 | 160 | 160 | 180 | 180 | 180 | 180 |
| 2017 | 180 | 170.9 | 180 | 168.1 | 180 | 168.8 | 180 | 168.7 |
| 2018 | 180 | 166 | 180 | 164.9 | 180 | 165 | - | - |
It is important to take the inflation factor into account any time we are speaking about pensions. In those circumstances when pensions do not increase, pensioners can purchase less products and services as a result of rising prices. Since 2012 until 2016, the nominal pension growth exceeded the consumer price growth; that is, the real income of pensioners has increased. In 2017 the inflation rate reached 6.7% which is the highest inflation rate registered under the Georgian Dream’s tenure.
Table 2:
Inflation in Georgia in 2007-2017
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
| Annual Average Inflation Measured against the Annual Average Inflation of the Previous Year | 11 | 5 | 3 | 11.2 | 2 | -1.4 | 2.4 | 2 | 4.9 | 1.8 | 6.7 |
In 2017-2018 pensions did not increase and, therefore, the pension’s purchasing power has been constantly declining. As a result, the real income of pensioners dropped by 9% in the third quarter of 2018 as compared to the real income in the same period of 2016. In other words, a pensioner was unable to buy all of those products in 2018 which he could buy with his pension in 2016.
The inflation target for 2019 is 3%. As a result of the increase in pensions, the nominal pension will amount to GEL 200. If the real inflation matches the targeted figure, the real pension will be GEL 184 at the end of 2019. In 2016, the nominal pension matched the real pension and constituted GEL 180. Therefore, a pensioner at the end of 2019 will be able to buy all of those products which he could purchase with his pension in 2016 and have a surplus of GEL 4. Therefore, a pensioner’s welfare in numbers will be slightly improved although the increase in pension is in fact so marginal that it will hardly compensate for the rise in prices. The actual well-being of pensioners will not improve as compared to 2016. The GEL 20 increase in pensions on the part of the state will only compensate for losses inflicted as a result of rising prices.
