The FINANCIAL — The Prime Minister of Georgia, Giorgi Kvirikashvili stated at an international conference organised by the McCain Institute and EPRC International: “According to the World Economic Forum’s macroeconomic environment indicators, we were in the 137th place five years ago. Today, we are in the 40th place, meaning that we have improved our position by 97 places.”
The World Economic Forum publishes country rankings according to the macroeconomic environment. This assessment of country macroeconomic environments is part of the Global Competitiveness Index. The latest Global Competitiveness Index Report was published on 27 September 2017. At the time of the Prime Minister’s statement, the latest available resource was the 2016-2017 report published in September 2016. According to this report, Georgia was indeed in the 40th place in the world based on macroeconomic environment indicators. Five years ago, according to the 2011-2012 report, Georgia was in the 137th place in terms of the macroeconomic environment.
One important factor has to be taken into account. The 2011-2012 report reflected the macroeconomic environment of 2010 whilst the 2016-2017 report reflected the macroeconomic environment of 2015. According to the 2011-2012 report, Georgia was 137th among the world’s 142 countries in terms of macroeconomic environment as a result of its high budget deficit (4.8% of the GDP) and the high level of inflation (7.1%) whilst the total national savings was low (5.2% of the GDP). Of note is that the impact of the 2009 world financial crisis was strong in 2010. According to the 2013-2014 report (reflecting 2012), Georgia moved upwards to the 61st place in terms of its macroeconomic environment because the budget deficit was cut to 1% with, instead of inflation, Georgia having a 1% deflation rate. The total national savings also grew to 14.9% of the GDP.
According to the 2016-2017 report, the budget deficit was 1.2% of the country’s GDP, the inflation rate was 4% and the total national savings amounted to 21.7% of the GDP. Several methodological changes have also taken place. For instance, in the 2011-2012 report, a measurement of interest rates (Georgia was 129th according this indicator) was used to evaluate the macroeconomic environment which is absent in the previous reports.
According to the 2017-2018 Global Competitiveness Index Report which reflects situation in 2016, the absolute mark given to Georgia’s competitiveness – 4.3 points has not changed. However, as a result of the improved performance of other countries, Georgia’s position worsened for the first time in the last few years and dropped to the 67th place. In regard to the macroeconomic environment as discussed in this article, Georgia stepped backwards by eight places and at this time holdsthe 48th position. This decline by eight places came as a result of the budget deficit (1.6% of the GDP) growth, a decrease in national savings (to 19.4% of the GDP) and a growth in the state debt (up to 44.9% of the GDP).
Conclusion
According to the World Economic Forum’s 2016-2017 Global Competitiveness Index Report (reflecting the situation in 2015) Georgia occupies the 40th place with 5.24 points in terms of its macroeconomic environment. According to the 2011-2012 report (reflecting the situation in 2010), it was 137th with 3.7 points. Therefore, Georgia’s position improved by 97 places. Changes in methodology have also positively contributed to the improvement of Georgia’s position.
The 2017-2018 Global Competitiveness Index Report (reflecting the situation in 2016) was published after the Prime Minister made his statement. According to this report, Georgia declined by eight places in the ranking in terms of its macroeconomic environment. Georgia’s backsliding was stipulated by a growth in the budget deficit and the state debt as well as a decrease in the national savings. All of these are a direct result of the Government of Georgia’s performance and highlight the necessity to cut the budget deficit and decrease the state debt.
As a result of the change of circumstances after Giorgi Kvirikashvili’s statement, FactCheck leaves the Prime Minister’s statement WITHOUT A VERDICT.
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