Mamuka Mdinaradze: “Average annual inflation constituted 8.4% under the governance of the United National Movement whilst the figure under the Georgian Dream’s governance is 6%.”

Verdict: FactCheck concludes that Mamuka Mdinaradze’s statement is TRUE.

Consumer prices increased by a total of 76% in the period from 2004 to 2012 whilst the increase from 2013 to 2023 constituted 64%. The cumulative inflation rates were 68% and 66%, respectively, when comparing December inflation rates with the previous year.

Mamuka Mdinaradze divided the total inflation by the number of years, thus calculated the average annual inflation of 8.4% under the governance of the United National Movement and 5.8% during the Georgian Dream’s governance. Furthermore, the comparison of December to the same period during the previous year showed rates of 7.5% and 6%, respectively.

Although Mamuka Mdinaradze claimed that the average annual inflation rate declined by 2.4 percentage points, the actual difference in the case of the average annual inflation calculation was 2.6 percentage points whereas for the December-to-December of the previous year comparison, the variance totalled 1.5 percentage points. It is unclear which of the aforementioned figures the MP drew as he presented the average annual inflation of 76% in one case and later the December-to-December of the previous year comparison of 66%.

Since total inflation is calculated with compound interest, the average annual inflation calculated with this methodology does not coincide with the arithmetic average. Total inflation would have been 107% if consumer prices had increased by 8.4% each year from 2004 to 2012; similarly, total inflation from 2013 to 2023 would have reached 85% instead of 64%. However, the average annual inflation decreased from 6.5% to 4.6% and the December-to-December of the previous year comparison witnessed a decline from 6% to 4.8% following the change of government. Therefore, inflation during the Georgian Dream’s rule is lower than under the previous government.

The primary claim in the MP’s statement, that the average rate of inflation during the governance of the United National Movement was higher than when Georgian Dream is in power, is accurate. Despite slight inaccuracies in the presented figures, the aforementioned errors are insignificant. Considering all the above, FactCheck concludes that Mamuka Mdinaradze’s statement is TRUE.

Analysis

Mamuka Mdinaradze, leader of the parliamentary majority, claimed when discussing inflation: “I spoke to Mr Gogita Tedoradze (Head of GeoStat) a few minutes ago and asked him to inform me about the inflation rates since 2012 and for the period of 2003-2012. [Inflation in 2013-2023] was 66.5% and I ask you (addressing journalists) to divide the figure by 11 years… It turns out that the average annual inflation during the Georgian Dream’s governance was and is 6%. Now I ask you to divide 75.8, the total inflation during the United National Movement’s governance, by nine… That is 8.4%. Therefore, the UNM had 8.4% [average annual inflation]0 whilst we have 6%, especially in light of having overcome two crises – two wars in the region and the Covid pandemic for three years.”

Whilst practically all countries with a market economy are characterised by inflation - the increase in the overall level of consumer prices - the volume of inflation is a key metric. Moreover, it is essential to compare average prices of the entire year with the average of the previous year or a specific month with the same period of the previous year to rule out the seasonality effects. Typically, the aforementioned comparison is based on the month of December.

Mamuka Mdinaradze divided the total inflation during the two different governments by the number of years to draw the average annual rates of inflation. Whilst the MP mentioned the term “average annual rate of inflation,” suggesting a 12-month average, but cited that the average annual figure was 76% in one case and 66% in the case of the December-to-December of the previous year comparison, FactCheck verified both the average annual rates and the rates of December as compared to December of the previous year.

The inflation rates fluctuated from year to year during the governance of both the United National Movement and the Georgian Dream political parties with periods of both deflation and double-digit percentage growth of consumer prices observed.

Graph 1: Annual Inflation

Source: National Statistics Office of Georgia

The total average annual inflation indeed constituted 75.8% from 2004 to 2012 and dividing this figure by nine, we get an average annual inflation rate of 8.4% as asserted by Mamuka Mdinaradze. The total inflation during the period for the years 2012 to 2023 constituted 64.3%; dividing the figure by 11 gives an average annual inflation rate of 5.8%.

When analysing the statistics from December to December of the previous year, the total inflation from 2004 to 2012 reached 67.6% with an annual average of 7.6%; whereas the figures for the period from 2012 to 2023 were 66.5% and 6%, respectively.

The inflation rate of 75.8%, as claimed for the period of the UNM government, corresponds to the total (compound accrual) average annual inflation whilst the inflation rate of 66.5%, as claimed for the Georgian Dream’s governance, slightly exceeds the real value. The average inflation is 8.4% and 5.8%, respectively, when discussing “average annual inflation,” and 7.5% and 6% in the second case (December to December), whilst comparing the relevant statistics. Whilst the MP aimed to highlight that the difference compared to the previous government totalled 2.4 percentage points, the actual figures are 2.6 percentage points in one case and 1.5 percentage points in the other.

Table 1: Consumer Price Index (Inflation

Source: National Statistics Office of Georgia

Whilst the MP’s claim that inflation was higher during the United National Movement’s governance is generally accurate, one more detail arises when drawing relevant statistics. Consumer prices would have increased by 76% instead of 107% if inflation had been 8.4% during each year between 2004 and 2012; similarly, if inflation from 2013 to 2023 was 5.8% each year, a total increase in consumer prices of 86% would be observed rather than 64%. The discrepancy is caused by compound interest. For instance, if the price of a certain item were GEL 100 in one year and increased by 10% for the two following consecutive years, its final value would amount to GEL 121 (100*1.10*1.10), not GEL 120 (100+10+10).

The average annual inflation would be 6.5% from 2004 to 2012 (the increase in consumer prices would total 76% if inflation were 6.5% every year) and 4.6% from 2013 to 2023 using the arithmetic average method. The corresponding rates would be 6% and 4.8%, respectively, when comparing December to December of the previous year. However, inflation during the UNM’s rule is nonetheless higher by 1.9 and 1.2 percentage points, respectively, even with the aforementioned calculations.

Graph 2: Average (Arithmetic) Annual Inflation

Source: National Statistics Office of Georgia

Mamuka Mdinaradze further underlined that the ruling party managed to reduce the inflation rates in light of the war and the Covid pandemic. Despite inflation peaking in 2021-2022, a crisis was also recorded in 2008-2009, however, the latter was qualitatively different and acted to reduce the price level (in an opposite direction). Thus, inflation of 2009 was one of the lowest at 1.7%.

The primary claim in the MP’s statement, that the average rate of inflation during the governance of the United National Movement was higher than when Georgian Dream is in power, is accurate. Although different methodologies for calculating average inflation yield different figures, the trend persists – consumer prices witnessed higher growth rates in 2004-2012 as compared to 2013-2023. However, there are insignificant inaccuracies in the highlighted numbers. Considering the above, FactCheck concludes that Mamuka Mdinaradze’s statement is TRUE.