Levan Davitashvili: “Food prices are being decreased.”

Verdict: FactCheck leaves Levan Davitashvili’s statement WITHOUT A VERDICT.

Resume: According to February 2023’s data, prices on several food products have indeed decreased, albeit insignificantly. There is only a yearly decrease in the prices of sunflower oil, buckwheat, apples and cabbage. One month’s data alone are insufficient to discern a trend. Of additional note is that as per the retail sector’s claim, the price decrease happened at the expense of promotional pricing and is so insignificant that people cannot yet appreciate it. The Minister of Economy underlines an intense price decrease process in his statement which is wrong and aims to exaggerate an insignificant decrease in prices. Therefore, as our research period is time-limited and we are unable to monitor price decrease, FactCheck leaves the Minister’s statement at this stage WITHOUT A VERDICT.

Analysis

After the end of a session of the Government of Georgia, the Minister of Economy and Sustainable Development, Levan Davitashvili, made a statement about the prices of foodstuffs: “You have seen a trend that quite a large number of stores started to decrease their prices on food products. This is a rather intensive process. Sectoral associations, the associations of importers and distributors as well as a number of international organisations which support companies in the food chain are all involved in the process.”

Lately, food prices have been going up virtually every month. In February 2023, the Prime Minister stated: “As a result of a preliminary study of food prices carried out by the Competition Agency, it was found out that the population is ultimately buying food products with a mark-up of 100%.” Therefore, Irakli Gharibashvili instructed the Minister of Economy and the Minister of Agriculture to set up a working group and study the issue. Eventually, the Ministry of Economy started to prepare a new draft law which aims to artificially regulate food prices.

FactCheck tried to verify if the Prime Minister’s statement affected food prices and whether or not food prices have decreased. At this moment, only February data are available and, therefore, we will use these figures for the analysis.

According to the data of the National Statistics Office of Georgia, the annual inflation rate in Georgia was 8.1% in February 2023 whilst the inflation rate for food and non-alcoholic beverages was 14%. The share of food and non-alcoholic beverages in the annual inflation rate was 33.7%. In regard to inflation in February, there is a deflation of -0.7% as compared to January 2023 whilst the inflation rate for food and non-alcoholic beverages was 1.2%.

In regard to prices of certain food products, Table 1 includes price changes as compared to the previous month as well as the year (as compared to the same month of the previous year).

Table 1: Consumer Price Index

Source: National Statistics Office of Georgia

As illustrated by the data, prices for rice, buckwheat, macaroni, wheat flour, dairy products, sunflower oil, sugar, dried beans, instant coffee and cabbage insignificantly went down in February 2023 as compared to the previous month. However, if we take a look at food prices over the year, we will see that prices dropped only for buckwheat, sunflower oil, apples and cabbage. As mentioned earlier, there is only a slight decrease of prices at the moment. In this light, the Minister’s statement that the price reduction process is going on intensively is an exaggeration and aims to over highlight the only insignificant drop on food products. What is more, the Chairperson of the Retail Sector Association, Sophio Kashakashvili, noted in her interview that falling prices on products are occurring because of promotional pricing at this stage, although this drop is so low that consumers cannot appreciate it unless distributors also start to reduce their prices on products.

We should also emphasise that as mentioned earlier, the Prime Minister paid attention to high prices on products and instructed relevant agencies to artificially regulate the prices. It is well-known that one of the major principles of a market economy is that product price is determined by the supply and demand ratio. Price regulation can have a certain justification under monopolies; however, in such a competitive food market, the imposition of price ceilings on food products may bring negative consequences as there will be shortage of some products or their quality will drop. In the long-run, regulating the market will negatively affect the entire economy.

To summarise, we may say that prices have only decreased for certain food products at this stage (February) and only as compared to the previous month alone.

When it comes to year-to-year comparisons, the list of such products is very limited – prices only decreased significantly for sunflower oil, buckwheat and cabbage. At the same time, a one-month trend alone is insufficient to discern a price decrease trend. Therefore, at this moment FactCheck leaves the Minister’s statement WITHOUT A VERDICT. We will continue monitoring food product prices and regularly provide readers with updated information.


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