The FINANCIAL -- Verdict: Irakli Kobakhidze’s statement is MOSTLY TRUE.
Resume: The figures named by Irakli Kobakhidze match the figures of the National Statistics Office of Georgia. However, the Office’s figures for 2012 and 2017 are not comparable to each other because the results of the 2014 universal public census have not been taken into account. In accordance with the new data of the International Monetary Fund, which does take these results into account, Georgia’s GDP per capita decreased from USD 4,131 to USD 4,099 in 2012-2017. This decline is caused by the change in the GEL exchange rate.
Despite the irrelevant comparison, the basic context of the statement of the Speaker of the Parliament of Georgia in regard to the harsh social environment in Georgia is correct. The pathos of Mr Kobakhidze’s statement that revenues which slightly exceed USD 4,000 per capita will hardly lead to prosperity does indeed depict reality. The World Bank assesses income levels of countries in terms of the GNI per capita measured by the Atlas method. In accordance with this indicator (USD 3,830 in 2016), Georgia belongs to the group of countries with a lower-middle income. In addition, as measured by the World Bank, 69% of Georgia’s population was living in extreme or moderate poverty in 2014.
On 8 May 2018, on air on the talk show Archevani, the Speaker of Parliament of Georgia, Irakli Kobakhidze, stated: “Georgia’s economy was USD 3,500 in 2012 whilst today it exceeds USD 4,000. The social environment is harsh and the level of poverty is high.”
In his statement, Irakli Kobakhidze refers to Georgia’s GDP per capita figures. Of note is that it is necessary to use the real GDP in the national currency in order to compare the changes in a country’s economy over time. At the same time, it is also necessary to measure the GDP by purchasing power parity (PPP) in international dollars, if a conversion of economic figures to a common currency is needed, in order to make comparisons with other countries.
In accordance with the data of the National Statistics Office of Georgia, Georgia’s GDP in the accounting period (2010-2017) was fluctuating whilst the GDP per capita was increasing.
At the beginning of the accounting period, Georgia’s GDP was USD 11.6 billion and this figure was increasing up until 2015. In 2014, the figure hit a record high and reached USD 16.5 billion. In 2015, it decreased by USD 2.5 billion but has continued to grow since 2016. Of importance is that the reason behind the drop in the GDP has largely been because of the depreciation of GEL. In order to illustrate a real decline or growth of an economy, we have to take a look at the GDP given in the national currency. Georgia’s GDP in the national currency has shown a constant increase throughout the accounting period.
In accordance with the information of the National Statistics Office of Georgia, Georgia’s GDP per capita was increasing annually in 2010-2017. In 2010, Georgia’s GDP per capita was USD 2,623 and reached USD 3,523 in 2012 as mentioned by Mr Kobakhidze. In 2017, Georgia’s GDP per capita surpassed USD 4,000 and reached USD 4,079. However, the National Statistics Office of Georgia’s data vis-à-vis the GDP per capita do not give a real picture. The data for 2012 are measured for 4.5 million people as given in the old census whilst the GDP per capita is measured by taking the new census data of 3.7 million people into account for the case of 2017. Therefore, the data for these two periods are not comparable to each other.
Statistical data published by the International Monetary Fund are free from the numerical error as they take the new census results into account. As a result, the trend of the GDP per capita changes has also been amended. Hence, there is no growth of the nominal GDP figure in USD throughout 2012-2017 but instead a decrease by USD 32 from USD 4,131 to USD 4,099. This decline is caused by the changes in the GEL exchange rate.
The World Bank uses the gross national income per capita (GNI per capita)1 indicator to classify countries in terms of their incomes. It is measured by a special method (World Bank Atlas method) instead of using the nominal exchange rate. In the past few years, Georgia has been at the margins of lower-middle and upper-middle income countries under this classification. In 2003-2014, Georgia belonged to lower-middle income countries whilst it moved to the upper-middle income category in 2015 but still remains in the lower-middle income country group from 2016. Of note is that Georgia’s GNI per capita (USD) measured by the Atlas method has been declining since 2015 as opposed to the figures discussed at the beginning of this article.
At the same time, the country’s poverty figures are important in order to assess the social environment on the ground. In accordance with the data of the National Statistics Office of Georgia, 21.3% of Georgia’s total population was living below the extreme poverty line in 2016 whilst 20.6% consumed less than 60% of the median consumption. In accordance with the World Bank’s assessment published in 2014 (updated version of this research is currently unavailable), 32% of Georgia’s population was extremely poor, 32% was moderately poor and 24% was at a risk of poverty.
The gross national income (GNI) is the total domestic and foreign output claimed by residents of a country. The GNI differs from the gross domestic product (GDP) by the differences between income received by Georgian residents abroad (including income from employment or property) and income received by foreign residents in Georgia.