Irakli Kovzanadze: “In the first nine months of this year, Georgia’s economic growth reached 4.9% which exceeds the planned amount and as a result, we have a GEL 280 million surplus in budget revenues.”

Irakli Kovzanadze: “In the first nine months of this year, Georgia’s economic growth reached 4.9% which exceeds the planned amount and as a result, we have a GEL 280 million surplus in budget revenues.”

Irakli Kovzanadze: “In the first nine months of this year, Georgia’s economic growth reached 4.9% which exceeds the planned amount and as a result, we have a GEL 280 million surplus in budget revenues.”

The FINANCIAL -- Verdict: FactCheck concludes that Irakli Kovzanadze’s statement is TRUE.

Resume: The 2018 state budget is based on an expected 4.5% economic growth rate whilst the average economic growth rate in the first nine months of the year reached 4.9%. Therefore, the nine-month plan for state budget revenues was executed in surplus. In the first nine months, there is a GEL 280.3 million surplus in budget revenues whilst the surplus in tax income constitutes GEL 194.7 million.

Analysis

Head of the Budget and Finance Committee of the Parliament of Georgia, Irakli Kovzanadze, spoke about economic growth and budget revenues in 2018. As stated by Mr Kovzanadze, the economic growth rate in the first nine months of the year exceeded the planned amount and reached 4.9% whilst the surplus in budget revenues for the same period constitutes GEL 280 million.

The 2018 state budget is based on an expected 4.5% economic growth rate. In the first nine months of 2018, the average economic growth rate reached 4.9%. Of the first three quarters, the highest growth at 5.5% was registered in the second quarter whilst the economic growth rate slowed down in the third quarter as compared to the previous quarter and constituted 4.0%.

In addition, given the existing figures the estimated economic growth rate for 2018 was set at 5.0% whilst the 2019 draft state budget is based on an expected 4.5% economic growth rate. Similar to the figures for the first nine months of 2018, the average economic growth rate in the first nine months of 2017 exceeded the estimated numbers.

Graph 1: GDP Growth Rate (%)


Source: National Statistics Office of Georgia, State Budget

State budget revenues; in particular, tax incomes, are associated with the economic growth rate. If the growth rate is higher as compared to the estimates, then budget revenues are fulfilled in surplus. The 2018 state budget revenues plan for the first nine months of the year was fulfilled by 103.8% as compared to the planned amount. In the same period, budget revenues were executed with GEL 280.3 million in surplus and total revenues reaching GEL 7,746 million. Of that amount, tax incomes in the first nine months were fulfilled by 102.8% which is GEL 194.7 million more as compared to the planned amount.

In addition, the other revenues budget line was also fulfilled with GEL 68.5 million in surplus. Therefore, the fulfilment of budget revenues in surplus was largely stipulated by a higher than expected economic growth rate.

Graph 2: State Budget Fulfilment Figures for the First Nine Months (%)

Source: Ministry of Finance of Georgia

Similar to the fulfilment of the nine-month plan of budget revenues, the fulfilment rate of revenues, including tax incomes, also exceeded 100% in the past years.