The FINANCIAL -- On 11 June 2015, the Free Democrats held a presentation of their party’s economic views. The Party Leader, Irakli Alasania, focused, among other things, upon the amount of investments in the country. “The amount of investments has decreased catastrophically and is at its lowest level in the past five-to-six years,” said Mr Alasania.
FactCheck took interest in this statement and analysed the dynamics of the influx of foreign investments.
According to the data of the National Statistics Office of Georgia, the amount of foreign direct investments to Georgia amounted to USD 175 million in the first quarter of 2015 which is 34% lower as compared to the same period of the previous year. These numbers also fall significantly short as compared to the data of the same periods from 2011 to 2013. As for the indicators of percentage growth (or decrease), such low numbers have not been recorded in the first quarter of the year since 2009 (the global financial crisis and the aftermath of the 2008 August war).
According to the statistical data from 2006 to 2014, the highest levels of foreign direct investments were recorded in 2007 and 2008 whilst the highest growth rates were in 2006 and 2007. Even though the amount of investments increased significantly (35%) in 2014 and amounted to USD 1,272 million, it still falls significantly short as compared to the levels of 2007 and 2008.
Chart 2: Amount of Foreign Direct Investments and Percentage Growth from 2006 to 2014
In order to determine the real changes in the amount of investments it is necessary to see the ratio of the foreign direct investments to a country’s GDP. In general, the greater a country’s GDP, the greater amount of investments it needs to reach a high level of economic growth. The largest ratio of foreign direct investments to Georgia’s GDP was recorded in 2007 and 2008.
Chart 3: Ratio of Investment to the GDP from 2007 to 2014
The amount of foreign direct investments in the first quarter of 2015 decreased by 34% as compared to the same period of the previous year and amounted to USD 175 million. The amount of investments also decreased as compared to the same periods from 2011 to 2013. In addition, such a decrease in investments (-34%) has not been recorded since 2009.
The ratio of the investments to a country’s GDP is the best measuring tool for the amount of investments. According to the data from 2006 to 2014, the highest share of foreign direct investments in Georgia’s GDP was recorded in 2007 – 19.8% and 2008 – 12.2%. The ratio of investments to the GDP decreased significantly in the following years.
However, it should also be noted that the amount of investment grew by 35% in 2014 and amounted to USD 1,272 million which was the highest indicator since 2008. Hence, FactCheck believes that the assessment of the leader of the Free Democrats that the amount of investments has decreased “catastrophically” is excessive.
FactCheck concludes that Irakli Alasania’s statement is MOSTLY TRUE.