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On 2 December 2014, at a special briefing, United National Movement MP, Mikheil Machavariani, announced: 

“Inflation has already ‘eaten’ the pension growth of GEL 10.”

FactCheck

took interest in the aforementioned statement and verified it.

According to the 2015 budget project, pensions will increase by GEL 10, growing from the current GEL 150 to GEL 160, from the month of September 2015. In his statement, Mikheil Machavariani underlined that this proposed growth in pension has already been absorbed by inflation. Inflation refers to the increase of prices on goods and services. The pension in Georgia has risen from September 2013. We calculated how much inflation has decreased purchasing power from September 2013 to November 2014. The amount of inflation for the aforementioned period is 4.8% meaning that the purchasing power of GEL 150 decreased by GEL 7.2. Considering that pension will be increased to GEL 160 from September 2015, the inflation index will also be increased. According to the government’s economic and finance indices, the inflation index in 2015 will be 4%. As a result, as compared to September 2013, prices will be increased by 9% in September 2015. Consequently, the goods that a pensioner would have bought in September 2013 with GEL 150 will cost GEL 164 in September 2015. This means, therefore, a decrease in the amount of pension by GEL 4. According to the data of GeoStat, inflation in November 2013 was 0.6%, as compared to November 2012. Following price changes affected the formation of the annual inflation rate:

  1. Increasing tobacco and alcohol prices by 8.6%.
  2. Increasing residential, water supply, electricity and natural gas fee payments by 4%.
  3. Decreasing transportation service fee payments by 3.2%.

The rate of inflation was 2.8% in November 2014, as compared to November 2013. The rate was affected by several changes in prices:

  1. Increasing grocery and non-alcoholic beverage prices by 6.2%; among them, vegetables and herbs (27.7%), fruit and grapes (12.2%) and milk, cheese and eggs (4%). At the same time oil and fat prices have been decreased (-3.8%).
  2. Increasing healthcare fees by 4.8%.

Conclusion

Prices have increased by 4.8% from September 2013 to November 2014. According to this tendency, the purchasing power of the pension - GEL 150 - decreased by GEL 7.2. In September 2015, when the pension becomes GEL 160, the inflation index of the last two years will reach 9%. Therefore, the market basket consisting of consumer goods and the costs of services of GEL 150 in 2013, equaled to GEL 157.2 in November 2014 and will amount to GEL 164 in September 2015.

FactCheck concludes that Mikheil Machavariani’s statement: “Inflation has already ‘eaten’ the pension growth of GEL 10,” is TRUE.