The FINANCIAL -- The Deputy Minister of Finance, Giorgi Kakauridze, in his speech at the session of the Parliamentary Minority, stated: “As a result of the Government of Georgia’s correct economic policy, we have one of the highest economic growth rates in the region.”
FactCheck took interest in the accuracy of the statement.
According to the information of the National Statistics Office of Georgia, Georgia’s economic growth amounted to 5.1% in the first quarter of 2017. In the first quarter of 2016, the real gross domestic product (GDP) growth rate was 3.3%. In the first five months of 2017, Georgia’s economic growth rate was 4.5%.
As stated by Giorgi Kakauridze, Georgia's first quarter economic growth rate was the highest in the region. To analyse this part of the statement, it is important to clarify what is meant under the term region. The narrow definition of region might include Georgia’s immediate neighbourhood (Armenia, Azerbaijan, Turkey and Russia). The International Monetary Fund categorises Georgia with the Commonwealth of Independent States (CIS) member state group (even though Georgia has ceased its membership in the CIS). Even by the World Bank’s classification, Georgia belongs to the Europe and Central Asia countries group (region) which also includes CIS member states.
Table 1: Economic Growth Figures for the First Quarter of 2017 and 2016 of the Countries from Georgia’s Region (World Bank Classification)
In 2016, Georgia was in the 13th position with its 2.7% economic growth rate. Based upon the economic growth figures for the first quarter of 2017, Georgia occupies the 7th place from the group of 24 countries. Of our immediate neigbours, only Armenia is ahead of us with its 6.5% economic growth rate. The economic growth figures for Ukraine (2.5%), Turkey (1.4%), Russia (0.5%) and Azerbaijan (-0.9%) significantly lag behind Georgia’s economic growth rate as registered in the first quarter of 2017.
In the process of comparing Georgia’s economic growth figures to those of our neighbours, we have to take into account their current situations. Falling oil prices, declining incomes from the export of natural gas and the 2016 conflict in Nagorno Karabakh worsened Azerbaijan’s economy and resulted in a significant depreciation of its national currency. Falling oil prices and international sanctions imposed in the wake of the crisis in Ukraine negatively affected the economic situation in Russia. This in turn had a significant negative impact upon Armenia’s economy (Armenia holds membership in the Eurasian Economic Union and its economy is heavily dependent upon Russia). A political crisis, an attempted coup d’état and frequent terrorist attacks inflicted serious damage to Turkey’s economy as well. Hence, it would be appropriate to say that these countries have low economic growth rates and Georgia’s economic growth figure does indeed exceed theirs. However, in 2016, Turkey did have a higher economic growth rate as compared to Georgia.
In regard to Georgia’s increased economic growth rate in the first quarter of 2017, this happened largely because of improvements in the situation abroad. The volume of remittances transferred in January-March increased by 22.3% (USD 53 million), the export of goods increased by 30% (USD 134 million) and the number of tourists grew by 26%. The growth trend has been kept in place throughout April-May as well. For all of these three components, the improving economic situation in Russia is very important.
The Government of Georgia’s expenditure on infrastructure (growth of non-financial assets) should also have affected the economic growth rate. In the first quarter of 2017, the amount of money spent for infrastructure amounted to GEL 171 million (based on consolidated budget statistics) which is GEL 17 million less as compared to the figure registered (GEL 188.7 million) in the first quarter of 2016. Therefore, the government’s infrastructural expenditures in the first quarter have not had a positive impact upon economic growth. Infrastructural expenditures dropped by GEL 25 million in the period of January-May.
Georgia’s real GDP growth for the first quarter of 2017 was 5.1%. This figure cannot be categorised as high under any definition of the region. If we take only our neighbours, Armenia has a higher economic growth rate (6.5%) as compared to Georgia. However, if we use the World Bank’s classification, Georgia will take 7th place behind Uzbekistan, Kyrgyzstan, Tajikistan, Armenia, Turkmenia and Romania.
If we take into account last year’s figures, Georgia is in the 13th place and lags behind Turkey which had significant political and security problems in the last year. We also have to consider that the Russian crisis and falling oil prices significantly harmed the economies of Armenia and Azerbaijan.
FactCheck concludes that Giorgi Kakauridze’s statement is MOSTLY FALSE.