The FINANCIAL — Verdict: FactCheck concludes that Giorgi Kvirikashvili’s statement is mostly true.
Summary: Georgia’s foreign trade turnover amounted to USD 864 million in February 2018, with USD 224 million falling on export and USD 640 million – on import. Therefore, compared to the analogous period of the last year, export increased by 25%, while import increased by 9%, however, the given difference in growth rate turned out to be insufficient for the increase in net export, so the account deficit of the current year worsened by 1.5%, as compared to the same period in the previous year.
In February 2018, net remittances amounted to USD 95 million, which exceeds the analogous value from the last year by 20.6%. A 27% increase was recorded in the flow of tourists to Georgia, as it reached the mark of 177 thousand, that constitutes 40% of all the visitors that entered the country. Statistics of revenue received from tourism in 2018 is not available at this point, however, considering the increased flow of tourists, it is likely to have undergone a positive trend.
In order to analyse the parameters mentioned by the PM comprehensively, it is important to consider them in relation with GDP of the respective period, however, particular data is not available at this moment. Nevertheless, Giorgi Kvirikashvili, while speaking about the indicators, underlined that the given positive changes exert positive influence on economic growth, which is true, with the remittances being the only exception, as their effect on the economic growth is not evident.
On April 4 of the current year, the Prime Minister of Georgia, Giorgi Kvirikashvili stated: “The positive dynamic in February 2018, was, to a large extent, due to improved foreign trade indicators. Namely, in February 2018, export increased by 25%, import – by 8.7%. Revenues from international tourism grew as well. As for the other factors contributing to the growth, there has been a 20.6% growth in net remittances received.”
In February 2018, the GDP growth of Georgia amounted to 5.5%, which exceeds the January indicator by 1.1% points, while the average economic growth rate of January-February is 4.9%. Significant growth was recorded in processing industry, utility, social and personal services, operations with real estate and trade.
There was a positive trend of change in foreign trade indicators in February 2018. In this month, Georgia’s foreign trade turnover (total of export and import) constituted USD 863.7 million, which is higher than the last year’s analogous indicator by 21%. From gross turnover, export’s share was USD 223.7 million, while import amounted to USD 640.7 million, with the figures being higher than February 2017 indicator by 25% and 9%, respectively. However, it is noteworthy that the difference between the growth rates of export and import turned out not to be enough to increase net export (export minus import), as compared to the analogous period of the previous year – the current account deficit deteriorated by 1.5% (in February 2017, the analogous deterioration of the indicator was up to 12%).
Unlike the other indicators that were mentioned, the effect of remittances on GDP growth is not evident. In case of developing countries, social effect of remittances is more visible, rather than their ability to foster economic growth. In general, the effect of remittances on economic growth is conditional on how the received money is spent. Analysis of this correlation does not fall in the boundaries of this article; however, the main flows of remittances are likely to increase consumption. Considering the high share of import in consumption in Georgia, fostering demand on local level will result in an increased import.
In February 2018, the amount of remittances received by Georgia amounted to USD 95 million, which is 20.6% more than the analogous indicator from the previous year. According to the February 2018 data on net remittances, received remittances amounted to USD 114 million, whereas the sent remittances equaled USD 19 million.
In February 2018, the number of visitors who entered Georgia increased by 20% compared to the analogous indicator from the previous year and amounted 441 thousand, with tourists accounting for 40% of the figure – 177 thousand, which, in turn, is 27% more compared to the February 2017 indicator. It is noteworthy that the data about the revenues from tourism in 2018 are not available yet. Nevertheless, we can assume an increased revenue from tourism in February 2018 in the light of the increased inflow of tourists in this period, which would be also positively reflected in the economic growth in the respective month.
One should also mention that in order to evaluate the real magnitude of the foreign trade and remittances indicators, it is not enough to discuss and compare them in absolute numbers – it is essential to discuss them in relation to the GDP. However, the analysis given in this article could not have been carried out with such an approach, as, at this stage, the numeric benchmark of the 2018 GDP is not yet available.
1 A visitor who spends 24 hours or more in Georgia is considered a tourist.