Why should I be interested in this topic?

Sociological studies show that for years, the absolute majority of Georgian citizens have considered poverty and unemployment as the main challenges. According to 75% of the public, poverty has only increased over the past 10 years. The number of people resorting to emigration also increases every year.

In this context, it is even more crucial to determine whether improved economic indices, economic growth, and reductions in absolute poverty translate into increased citizen welfare.

Our comment:

Manipulation with statistics is easy. Often authorities direct attention to specific data, although only from one prism, and such an outlook radically changes the whole picture. 

It is necessary to look at statistical data holistically. If we thoroughly observe the whole picture, we will see that in recent years, the government has changed neither economic nor social policy, which would have affected society’s welfare. Therefore, despite the improvement in particular statistical data, the level of people's well-being has not increased in direct proportion.

1. What kind of economic growth do we actually have?

In the period from 2013 to 2020 (before the pandemic), the minimum rate economic growth in Georgia was 3% and the maximum was 5%. 

In the last 2 years:

• In 2021, real GDP growth amounted to 10.5%;
• In 2022, real GDP growth was 10.1%.

It is important to determine what led to the double-digit growth of GDP in the last 2 years:

• Lifting restrictions imposed due to the Covid-pandemic, opening the economy, and restoring the tourism sector (In 2020, during the pandemic, Georgia's economy decreased by 6.8% due to restrictions); 
• In 2022, after the invasion of the Russian Federation in Ukraine, the substantial increase in Russian citizens and Russian capital in Georgia; 
• The increased turnover of the construction sector and real estate had a significant contribution, that is directly related to Russian citizens' immigration to Georgia;

In Armenia, same as in Georgia, the economic growth in 2022 amounted to 12.6%, which is even more than the growth of the GDP of Georgia. There, too, this result was mainly due to the increased influx of immigrants and capital from Russia.

At the same time, the country has a high inflation rate, which leads to an increase in consumer prices for goods and services. The high local inflation maintained in the recent period is also related to the immigration of Russian citizens.

For more details, see: Causes of Iflation in Georgia 

GDP does not take into account and measure social, ecological, and cultural damage due to different types of economic activities. It does not include the distribution of the accumulated wealth among the society.

For more details, see: Economic Growth – Meaning of GDP and its calculation methodology 

The Gini coefficient, which measures the distribution of income and wealth in society, reveals that income inequality in Georgia is high and that wealth accumulated through economic growth is not evenly distributed in society.

Income inequality in Georgia is higher than in neighboring countries, not to mention EU member states (0 means ideal equality, and 1 - absolute deviation from ideal equality):

• Armenia - 0.28 
• Azerbaijan - 0.27
• Georgia - 0.34

For more details, see the article: Equality of resource distribution – Gini coefficient 

2. Is poverty really decreasing?

Absolute Poverty Index

Under the previous government, the absolute poverty rate fluctuated between 30-38% for 9 years, from 2004 including 2012.

For example, in 2007, economic growth in the country was 12.6%, but during the same year, the highest number of people living below the poverty line - 39% - was recorded, the Gini coefficient was 0.4, and child poverty - 42%. At the same time, in 2007, only 7.2% of the population received a subsistence allowance. This evidently shows that economic growth does not automatically lead to poverty or inequality reduction. These data also show the neoliberal rule of the previous government, which completely ignored the need for implementing the social policy.

What led to the decrease in the absolute poverty rate?

At the end of 2012, one-third of Georgia's population was on the verge of absolute poverty. By the end of 2022, this figure had fallen to 15.6%, which is certainly a significant reduction.

Table N1

Even though after the change of government in 2012, the number of people living below the absolute poverty line has been declining, at the same time, the number of people dependent on social assistance has increased significantly over the last 10 years. If, in 2012, 435,961 people (11.7% of the total population) received the subsistence allowance, by the end of 2022 this number increased to 645,738 (17.4%) (According to the data of June 2023, a total of 660,265 people receive the subsistence allowance: 474,009 people receive the allowance, and 186,256 people are participating in the program facilitating employment).

Table N2

Therefore, people particularly in need now have access to a state-mandated subsistence allowance:

• For a child under 16, this allowance is 200 GEL per month,
• In the case of an adult, this amount is a maximum of 60 GEL.

However, to what extent can we say that these people have overcome poverty, and/or what does the Government do to assist them in overcoming poverty?

When we touch upon the topic of socially vulnerable people, it is essential to know the purpose of social allowances: “Improving the socio-economic situation of poor families, reducing the level of poverty in the country and/or preventing it.” Therefore, it is of utter significance that the state must work in this regard as well, so that, on the one hand, people do not fall into the registry of the socially vulnerable, and on the other hand, to assist those dependent on social allowances to overcome poverty, to support their professional development and foster employment.

In 2022, at the initiative of the Prime Minister, a new sub-program aimed at fostering employment for the socially vulnerable was launched. It is difficult to assess the results of this program in one year and how it works. However, it can be said that the latter, like many other social policy programs, was not planned taking into account systematic considerations.

For more details, see: Walfere-toWork Policy of 2022 and the Socially Vulnerable 

There is a vast difference between the number of people living below the absolute poverty line in urban and rural areas. If this figure is 12.3% in cities, it amounts to 20.6% in villages. According to statistics calculated by the state, every 8th citizen living in the city, and every 5th citizen under the age of 16 residing in rural areas are below the absolute poverty line. This means that these persons do not have access to essentials such as housing, food, clean water, medicine, health care, clothing, education, etc.

International poverty line

The World Bank calculates three categories: the percentage of people who:

• Spend 2.15 dollars or less per day;
• Spend $3.65 or less;
• Spend $6.85 or less.

Table N3  

Since we already mentioned the example of the neighboring countries and compared particular data to Georgia, now let's look at the data of Armenia and Georgia according to the international poverty line:

• In Armenia, 0.5% of the population spends less than $2.15, in Georgia, this figure is 5.5%. 
• In Armenia, 8.7% spend less than $3.65, and in Georgia - 19.1%.

3.  What was the cause of the decrease in the unemployment rate?

From 2014 to 2020 (before the pandemic), the percentage of the unemployed has been steadily decreasing. The lowest rate was recorded in 2019 and was 17.6%. In 2021, the unemployment rate reached 20.6%, and in 2022, it amounted to 17.3% (according to the data for the first quarter of 2023, this figure is 18%).

Table N4

What was the cause of the decrease in the unemployment rate?

It is essential to determine what led to the improvement of unemployment statistics. Have there been increases in job openings or decreases in job seekers?

Reduced workforce

From 2015 to 2021, the labor force, i.e., the number of people looking for a job, has been steadily decreasing. Thus, people are less likely to look for a job, and they are no longer recorded in statistics.

Table N5 

For example, in 2019, the labor force included 1,572,788 people, and 1,295,900 were employed. In 2022, out of 1,551,573 people, 1,283,706 were employed (According to the data of the 1st quarter of 2023, the number of employed decreased by approximately 12 thousand compared to the data in 2022).

Therefore, to state that the number of jobs in Georgia has vastly increased is an overstatement, since in absolute terms, more people were employed from 2015 to 2019 compared to 2022.

As for employment levels, it fluctuated between 40-43% in 2015-2022. Thus, during the last eight years, neither the level of employment nor the number of employees has increased significantly. 

Welfare-to-Work Policy

In Georgia, the number of economically inactive people (1,437,350) is particularly high. We can conclude that 48% of the potential workforce does not even participate in developing the economy.

This indicates that the steps taken under the state policies to stimulate labor are not effective and systematic.

For more details, see: Challenges of the Welfare-to-Work Policy 

Large-scale migration

In 2015-2022, the number of the workforce in the country decreased by approximately 124 thousand people. In the same period, the number of people emigrating from Georgia and the negative balance of migration (the ratio of people who left the country and returned) also increased. The majority of immigrants are people of working age (15-64 years old).

In 2022, more than 100,000 Georgian citizens left the country, the highest number in the last 10 years. We have a “sort of” positive migration balance in the country, although this is due to the war waged by Russia in Ukraine and the sharp increase in the number of Russian citizens. As for Georgian citizens, the migration balance is sharply negative. The number of citizens leaving the country is more than those coming in by 46,397, which is the worst result in the last 10 years.

For more details, see: Statistics regarding migration 

What does the state do so that a person does not fall below the poverty line, and as a result, into the registry of the socially vulnerable?

The country does not have a sound social policy that would insure citizens and take preventive steps so that people do not fall into the registry of socially vulnerable people. The country does not provide basic social security guarantees as the minimum wage, and unemployment insurance/benefits. There is no well-functioning housing policy, a strategy to combat homelessness, labor legislation enforcement is problematic in practice, and much more.

For more details, see: The social security system in Georgia is not stable and universal 

And finally,

It can be said unequivocally that neither in 2021 nor in 2022, a new economic model has been developed in Georgia. No enterprises have opened that would lead to sustainable economic development. The country is still mainly dependent on the tourism, remittances, construction, and real estate sectors.

For more details, see: Why does economic growth not improve the economic conditions of most people in society?