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Natia Turnava: “The positive dynamic of economic growth will continue in the coming years and with this indicator the country will be the leader, both in the region and among European countries.”

Verdict: FactCheck concludes that Natia Turnava’s statement is HALF TRUE.

Resume:

According to the preliminary estimates of the National Statistics Office of Georgia, the real gross domestic product (GDP) growth was 6.9% in September 2021 as compared to the same period of the previous year whilst the average figure for the first nine months of 2021 is 11.3%. However, the higher economic growth rate in 2021 is largely stipulated by the base effect which is often referred to in Georgia’s political or expert community as the “spring effect.” Therefore, it is important that future economic growth forecasts are high growth in essence unlike the growth in 2021 which is attributable to technical/mathematical reasons.

According to the International Monetary Fund’s forecasts, Georgia is ranked at the top both in the region and across Europe in general with a 5.8% average economic growth rate forecast for 2021-2026. Naturally, this indicates a promising dynamic to a certain extent. In particular, Georgia has better forecasts as compared to relatively similar as well as smaller economies which to a certain extent rules out any advantage from the base effect. However, the level of uncertainty is very high amid the pandemic and post-pandemic situation and forecasts are subject to substantial changes in a very short period of time. It is not uncommon that factual figures fail to coincide with the forecasts. Therefore, although Georgia has promising forecasts as compared to other countries based on the IMF’s assessment, it is still early to make straightforward conclusions about success or failure based on the forecasts. It needs to be highlighted as well that a 5.8% economic growth on average is very little for a developing country like Georgia and poverty reduction and rapid development goals will be harder to achieve at such a pace.

Analysis

The Minister of Economy and Sustainable Development of Georgia, Natia Turnava, speaking about the 2021 economic growth dynamic, stated: “The positive dynamic of economic growth will continue in the coming years and with this indicator the country will be the leader, both in the region and among European countries.”

According to the preliminary estimates of the National Statistics Office of Georgia, the real gross domestic product (GDP) growth was 6.9% in September 2021 as compared to the same period of the previous year whilst the average figure for the first nine months of 2021 is 11.3%. However, the 2021 growth figure is partially stipulated by the base effect since unprecedentedly stringent pandemic-related measures were imposed in March-June 2020 which basically paralysed many economic fields. In 2020, the real economy contracted by 6.2% which partially resulted in a higher economic growth figure in light of lifting restrictions in 2021 and the restoration of a slackened total demand. Among the Georgian political or expert communities, this 2021 effect is often referred to as the “spring effect.” Therefore, future economic growth rate forecasts, if realised, should be more “desirable” instead of partially attributable to technical reasons.

Speaking of future economic growth dynamics, it is likely that Natia Turnava makes reference to the International Monetary Fund’s (IMF) forecasts. The IMF’s World Economic Outlook’s (WEO) database is published twice every year in spring and autumn. As of the data for 12 October 2021, the IMF expects that Georgia’s economy will grow by 7.7% in 2021. Of note is that the IMF’s initial growth forecast was 3.5%, although the higher than expected economic recovery dynamic as compared to 2020 led to a sharp improvement of the economic growth forecasts.

In 2020, Georgia’s economy contracted by 6.2% which was the biggest drop in the neighbouring countries after Armenia. If the IMF’s economic growth forecast for Georgia in 2021 holds true, Georgia’s economic recovery vis-à-vis 2019 will be 1% which will rank Georgia third among the neighbouring countries after Turkey and Russia. However, Georgia is ranked at top among the neighbouring countries with its average 5.8% economic growth forecast for 2021-2026.

Table 1: Forecasted Economic Growth Dynamic in Georgia and Neighbouring Countries According to the IMF

Source: International Monetary Fund

According to the forecasted economic growth rate for 2021, Georgia is ranked 18th among 195 countries and 69th in terms of economic recovery vis-à-vis 2019. However, Georgia is ranked 24th in terms of the average economic growth rate forecast for 2021-2026. Of note is that both in the region [1] as well as across Europe, Georgia is ranked at the top in terms of the forecasted economic growth which indicates a promising dynamic to a certain extent. In particular, Georgia has better forecasts as compared to relatively similar as well as smaller economies which to a certain extent rules out any advantage from the base effect. However, the level of uncertainty is very high amid the pandemic and post-pandemic situation and forecasts are subject to substantial changes in a very short period of time. It is not uncommon that factual figures do not coincide with the forecasts. Therefore, although Georgia has promising forecasts as compared to other countries based on the IMF’s assessment, it is still early to make straightforward conclusions about success or failure based on forecasts.

[1] This includes the Eastern Europe and Central Asia region, as defined by the World Bank, which incorporates 24 countries.


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