Zurab Chiaberashvili: “People are getting poorer – incomes are decreasing and expenses are rising.”

Zurab Chiaberashvili: “People are getting poorer – incomes are decreasing and expenses are rising.”

Zurab Chiaberashvili: “People are getting poorer – incomes are decreasing and expenses are rising.”

The FINANCIAL -- On 3 May 2017, Movement for Freedom – European Georgia member, Zurab Chiaberashvili, published his statement on a social network: “Prices on food and medication have already been increasing against the backdrop of GEL depreciation and increased excise tax on petrol, diesel and gas further accelerated that process. It is a fact that under Bidzina Ivanishvili’s rule, the prosperity of our citizens is declining. People are getting poorer, family income decreased and expenses are rising.”

FactCheck took interest in the accuracy of the statement.

Excise tax on petroleum products, including fuel, has been raised since January 2017. Considering the nature of the excise tax and the inelastic demand on these products, it is logical to assume that the tax increase was almost fully reflected in product prices. An increase in fuel prices naturally causes price hikes of other products, too, as a result of increased logistical expenses and the cost of production which in turn is a precondition for increasing the actual sale prices. In the last year, the price of diesel went up by 40% whilst the price of petrol increased by 37% and the price of natural gas fuel rose by 22.5%

To ascertain the share of excise tax in changing the level of prices, this requires a relatively complex statistical analysis which goes beyond the scope of this article in order to calculate the extent to which excise tax alone causes price changes. However, the assumption that the increase in excise tax has contributed to price hikes is completely valid. Table 1 depicts the changes in the price levels of products named in Zurab Chiaberashvili’s statement.

In regard to the country getting poorer, we can measure this by using the gross domestic product (GDP) per capita. The respective statistical data are given in the second table and show a positive dynamic both in terms of nominal and real figures. In regard to the significant growth rate which has been registered since 2015, we have to say that this is largely caused by the results of the public census; that is, a reduced number of the population. However, if we assume that the population figure remains the same, the real income per capita has still increased.

A second important indicator to measure incomes is changes in remuneration received as a salary. In the last quarter of 2016, the average monthly salary was GEL 1,066 which is 5.4% more as compared to the same figure registered in 2015. In order to assess the tendency in its full run, it is necessary to add that the average salary has not decreased in any of the quarters of the past few years. It is only the growth rate which has become slower.

Conclusion

The increase in the excise tax resulted in the increased level of prices. Prices increased on medication and food as underlined in Zurab Chiaberashvili’s statement. However, to determine the extent to which the change in the excise tax has affected the price hike goes beyond the scope of this article.

In regard to the population getting poorer, it is necessary to note that based upon official statistical data, there is no such trend. On the contrary, the real income per capita has a tendency of growth. This means that in spite of soaring prices, the population’s purchasing power has increased because, on average, incomes in the country have grown higher as compared to expenses.

FactCheck concludes that Zurab Chiaberashvili’s statement is MOSTLY FALSE.