For over 20 years, the Georgian economy has been enduring stagnation instead of growth. Whichever argument you may bring against this fact, the statistics do not lie. The volume of the Georgian GDP in 2012 amounts to only 80% of the country’s GDP registered in 1990.”FactCheck
inquired about the accuracy of the given statement.Economic stagnation is defined
as a prolonged period of little or no growth in the economy. Economic growth is described to be ‘little’ if the growth rate is significantly lower than is potentially achievable. Generally, an annual growth of 2% to 3% is considered a sign of stagnation.
Throughout the years 2003-2007 and 2010-2012 the Georgian economy took a remarkable upturn and so it is safe to say that the economy of the time endured no stagnation of any sort. However, such cannot be said for the period of the Georgian civil war and its aftermath when the economy grew at a very slow rate and placed the country into a period of economic stagnation.
As for the second part of the statement, in line with the data provided by GeoStat, the GDP of 1990 (calculated at the prices of 1996) equalled GEL 12 billion while the GDP of 2012 (at prices of 1996) totalled GEL 9.6 billion. Therefore, the GDP of 2012 indeed amounts to 80% of the volume of the GDP recorded in 1990. We would like to add as a reminder that real GDP reflects the value of goods and services produced in the country at constant prices (in the given case at prices of 1996) in order to exclude the factor of price fluctuation (inflation/deflation). Therefore, real GDP shows the actual growth in the volume of the final goods produced in the country.
However, for a comprehensive analysis of the matter it is also to be taken into consideration that the GDP of 1990 includes the regions of Abkhazia and Samachablo, which were under the control of the central Government of Georgia at the time. Data for Abkhazia and Samachablo is unavailable starting from 1993 and therefore, real GDP of 2012 expresses the value of products and services produced solely on the rest of the territory of Georgia. Accordingly, setting the indices of 1990 against those of 2012 proves to be unjustified as in this case we are comparing the volume of GDP generated on the whole of the Georgian territory (including Abkhazia and Samachablo) with the GDP produced solely on 80% of Georgian land. Additionally, it is highly probable that if Abkhazia and Samachablo were still under the control of the central government of Georgia, political and economic risks of the country would be much lower and we would have much more favourable conditions for economic growth.
In addition to the abovementioned, it is imperative to take into the account GDP volume of the years 1993-1994. Georgia’s GDP in 1994 amounted to only 28.2% of the volume recorded in 1990 (virtually, 3.5 times less) which was caused by the civil war, conflict and the economic hardships entailed by dissolution of the Soviet Union. GDP of Georgia hit the lowest mark in 1994 throughout the period 1990-2012 and country’s economy had to recover from this severe economic situation. In 2012, Georgia’s GDP grew almost 2.8-fold as compared to the indicator of 1994, achievement of such degree is unfathomable under the conditions of economic stagnation.
The MP’s statement claiming that Georgia has been enduring stagnation for the last 20 years is unquestionably false. During the years 2003-2007 and 2010-2012, the Georgian GDP was growing at a fairly high rate which, naturally, excludes the possibility of stagnation in those years. Economic stagnation and recession was indeed the case in the period of the civil war and its aftermath as well as throughout the years 2008-2009. However, labelling the significant economic growth achieved in the last decade as ‘stagnation’ is undoubtedly false.
As for the second part of the statement, the GDP of 1990 (calculated at the prices of 1996) equalled GEL 12 billion while the GDP of 2012 (at prices of 1996) totalled GEL 9.6 billion. Therefore, the GDP of 2012 amounts to 80% of the volume of the GDP recorded in 1990. Based upon these figures, we can say that the numbers indicated by the MP are mathematically correct but, in this regard, it is to be taken into consideration that the GDP of 1990 includes the regions of Abkhazia and South Ossetia whereas the indices of 2012 do not cover those two regions. Accordingly, setting the indices of 1990 against those of 2012 proves to be unjustified as in this case we are comparing the volume of GDP generated on the whole 100% of the Georgian territory with the GDP produced solely on 80% of Georgian land. Considering that this influential factor is neglected by the MP, this part of the statement is also not entirely accurate.Mindful of the circumstances elaborated above, we conclude that Soso Vakhtangashvili’s statement, “For over 20 years, the Georgian economy has been enduring stagnation instead of growth. Whichever argument you may bring against this fact, the statistics do not lie. The volume of the Georgian GDP in 2012 amounts to only 80% of the country’s GDP registered in 1990,” is HALF TRUE.
The initial version of the given article was published on 7 March 2014. Initially, FactCheck was unable to establish whether or not GeoStat held the data on GDP indices for the years 1990-2012 at constant prices. FactCheck inquired about the abovementioned data at GeoStat through a telephone conversation although this information could not be obtained and, therefore, the team assumed that the relevant information was simply unavailable as a result of which the fact was verified based upon other available data.
FactCheck received feedback in relation to the initial version of the article from Vladymir Basaria, Head of the Apparatus of the Parliamentary faction Georgian Dream – National Forum. He criticised the methodology employed in our research and pointed out a specific document where the GDP indices of 1990 and 2012 are calculated at constant prices; more precisely, at the prices of 1996. After having studied the said document, FactCheck took the newly retrieved data into consideration in its research and, consequently, corrected the article as well as the verdict.FactCheck expresses its gratitude towards Vladymir Basaria for his feedback and for pointing out the necessary document.