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Is Georgia’s Economy Worse Than in The 1990s? 


Irma Inashvili

Irma Inashvili

General Secretary, Alliance of Patriots of Georgia

“In reality, the country is in an economic crisis, as it was in the nineties.”

False
… economic data does not support the assertion.

On December 14, 2016, Irma Inashvili, General Secretary of the Alliance of Patriots – a pro-Russian party in parliament – said that “in reality, the country is in an economic crisis, as it was in the Nineties.”

But while Georgia is going through challenging economic times, statistics show the economy is in much better shape than it was back then.

Economic data shows that Georgia’s economy in 2016 is experiencing modest growth with moderate inflation.

But in the 1990s, the economy was in a free-fall, with gross domestic product (GDP) falling by 17 percent in one year and inflation soaring to an unprecedented 15,000 percent.

Mercedes Vera-Martin, a deputy division chief at the International Monetary Fund, said that “in the context of subdued global growth, the Georgian economy has shown resilience and continues to recover.” She added that while economic growth is not as strong as projected, “real GDP growth is now estimated at 2.7 percent in 2016…For 2017, economic growth is projected to pick up to 4 percent, supported by investment.”

According to Georgia’s National Statistics Office, in 2015 “real growth of GDP amounted to 2.9 percent.” In a recent report, the World Bank wrote that Georgia showed “significant progress in poverty reduction” and “shared prosperity in recent years.”

Vladimer Papava, a professor of economics at Tbilisi State University, wrote in an email to Polygraph.info that “today we do not have a hyperinflation and/or economic decline. On the contrary, the economy is growing.” He said that contrary to the 1990s, when many people refused to use banknotes, today “people are not turning away from the Lari” - Georgia’s national currency.

In an email to Polygraph.info, New America Foundation analyst Michael Cecire told Polygraph.info that Georgia’s economic growth this year is “pretty disappointing,” but “it is not a recession by any means.”

That’s in sharp contrast to conditions Georgians faced in the 1990s.

The World Trade Organization said in a report that “after independence in 1991, the economy collapsed under the impact of civil war. Output fell by 70 percent and exports by 90 percent, the worst decline suffered by any transition economy.” The WTO reports said that “by 1994, Georgia’s GDP was estimated at 17 percent of its 1990 level – the greatest fall among the countries of the former Soviet Union."

The deep economic crisis in the 1990s was seen in out-of-control inflation. The World Bank reports that in 1993 inflation reached a staggering 15,444 percent. Per capita GDP fell by 43.3 percent in 1992.

Georgia’s GDP in the 1992-1999 period varied from $2.5 billion to $3.6 billion. By comparison, in 2014-2016, Georgia’s GDP averaged $15 billion, a roughly five-fold increase over the economy of the 1990s.

“It defies reason to compare the current economic situation to that of the 1990s,” analyst Cecire told Polygraph.info. “Georgians have more individual opportunities for subsistence as well as greater access to a variety of consumer goods…and a state apparatus that generally functions well and unhindered by the kind of virulent petty corruption and organized crime that was endemic in the 1990s.”

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