Levan Davitashvili: “The economy has tripled under the Georgian Dream’s rule.”

Verdict: FactCheck concludes that Levan Davitashvili’s comment is HALF TRUE.

The Georgian economy was GEL 27.9 billion in 2012 whilst it was GEL 80,2 billion in 2023, 2.9 times more than 2012. Despite the high nominal increase, the real GDP increased only by 70% in 11 years. The main reason for the difference between these figures is inflation where consumer prices have risen by 64% in the same period.

Despite the cited nominal figure being correct, the statement that “the economy has tripled” creates an assumption that the real economy has increased three times which is not true. Therefore, FactCheck assesses Levan Davitashvili’s statement as HALF TRUE.

Analysis: At a briefing which was held after a cabinet meeting, Levan Davitashvili, Minister of Economy and Sustainable Development, said (from 22:40): “Under the Georgian government (under the rule of the Georgian Dream), the GDP has in fact tripled.”

When calculated in the national currency, the Georgian GDP in current prices was GEL 27.9 billion in 2012 whilst it was 2.9 times larger in 2023 – GEL 80.2 billion. Even though there was a very high nominal growth, the real economy increased only 1.7 times or by 70% and not by 190%. From 2013 to 2023, the nominal GDP grew by an average of 10.2% annually whilst the real economy grew at a rate of half – 5%.

Chart 1: GDP Growth, 2012=100%

Source: National Statistics Office of Georgia

There is a great difference between a nominal growth of 187% and a real growth of 70% as well as annual growth of 5% and 10.2%. The main reason for that is inflation.

Product prices generally increase from year to year except for a few cases. In some cases, the rate of increase is in the double digits and has a painful impact on citizens; sometimes, however, it is low and ranges between 2% and 3%. Low inflation is less noticeable but the difference becomes significant in the medium and long terms.

Consumer prices have increased by 64% in the country since 2012. To purchase the goods or services for which GEL 100 was enough in 2012, one would need to spend GEL 164 in 2023.

If calculated in 2023 prices, the GDP in 2012 would be GEL 45.9 billion instead of GEL 27.9 billion. It turns out that the real economy, calculated in constant prices, has not grown from GEL 28 to 80 billion but from GEL 46 to 80 billion.

If a person’s income tripled and expenses doubled, it is clear that he will be richer than the initial period by 1.5 times and not by three times.

Nominal growth only gives the possibility of a misleading perception of the information. Even in 2020, when the GDP shrunk by 6.3% (the biggest drop since 1994), the nominal GDP increased from GEL 49.7 to 49.8 billion.

In countries where hyperinflation is present, the GDP is growing at very high percentage rates when calculated in the local currency but this has nothing to do with real growth.

The statement of the Vice Prime Minister that “the economy tripled” without clarification is perceived as if the amount of goods and services produced in the country has indeed tripled and as if citizens can buy three times more products as compared to 2023, something which is not true. For this reason, FactCheck has assessed Levan Davitashvili’s statement as HALF TRUE.