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The Poor Class to Increase By 10-12% In Georgia

The GEL devaluation and a rise in prices on products, electricity and other services are shaking the solvency of Georgia’s citizens. If prices keep rising and the inflation rate hits 10%, the quantity of impoverished people in Georgia will increase extremely.

In such case 10-12% of the middle class will be impoverished, economic experts assert. Finally, by 2016 the middle class will constitute one-sixth of Georgian citizens instead of the existing one-fourth.

The social condition of Georgian citizens is worsening. Amid the GEL depreciation and a rise in electricity tariffs, prices of essential goods have already increased by 5.4%. Finally, the GEL depreciation will increase the annual expenses of a family by 300 GEL.

It should be noted the ratio of surged electricity tariffs to total expenses of Georgia’s citizens is very high. In Tbilisi, monthly electricity taxes will increase by about 30-40 GEL in an ordinary Georgian family, economic experts assert.

Electricity consumption grows extremely in the winter period and ordinary families in Georgia will bear serious losses, statistician Soso Archvadze commented. Hiked electricity tariffs will not hit only socially vulnerable citizens, because the government plans to alleviate their taxation burden for only this category. The government has ignored all other categories again.

Family expenses will increase by 25% on average by 2016, a part of economists assert. According to economic indicators, in 2014 the average expenses of a family were 956.2 GEL. Amid 25% (240 GEL) upturn, the average monthly expenses of a family will rise to 1,196 GEL from 956.2 GEL.

The families that have taken bank loans in foreign currency will have to pay higher amounts. In this case, monthly expenses may exceed 500 GEL. The middle class may further shrink and the poor category may further increase.

According to the official statistics, the poverty level in Georgia was fixed at 9-10% for the last years. Namely, the registered ratio of the poor population in 2011 was 9.2%, in 2012-2013 – 9.7%. In 2014, this indicator increased and constituted 11.6%. Meanwhile, the unofficial reports assert the poor category constitutes more than 50% of the Georgian population. The rich class constitutes about 20% of the Georgian population, the middle class makes up 25% and the remaining part is registered in the poor category, statistician Soso Archvadze said.

If the prices keep rising, at the end of 2015, the middle class will considerably shrink and the poor category will increase by 10-12%.

“How many citizens will be impoverished depends on two factors: 1) the size of the middle class; 2) inflation rates. We possess no legalized statistics on the size of the middle class, but we have expertise calculations, under which the middle class constitutes 23-25% of the population. If the inflation rate hits 10%, 10-12% of our citizens will leave the middle class and move to the poor category. Finally, if the middle class constitutes one-fourth of Georgian citizens, this correlation will shrink to one-sixth,” Soso Archvadze told the Business Resonance.

Sociologist Nodar Kapanadze finds it difficult to assess how many citizens will move to the poor category from the middle class. He confirms the GEL depreciation and increased electricity tariffs will have an extremely negative impact on the public welfare.

“Under the classical stratification, the middle class in Georgia is very small. Increased electricity tariffs will make less impact on this category. This segment will bear more losses from higher bank loan payments after the GEL depreciation. The surge in electricity tariffs and consumer prices will essentially shake the poor and this segment will be further impoverished. If the government decides and prepares some poverty reduction measures, a hike in electricity tariffs and the GEL devaluation will not become a heavy burden on the population. To this end, the Government should develop a strategy and take reasonable measures. I do not mean a compound of toasts in the strategy. Without this document, the living condition of our citizens will be deteriorated,” Nodar Kapanadze noted.

In general, poverty signifies a lack of welfare. Its size depends on the methodology of assessment in this or that country.

Accessibility Component is a basis for calculating the poverty indicator in western Europe (how accessible the desirable education, high-quality health care, safe food products and such are accessible to a citizen). In Georgia this methodology is based on only a minimal consumer basket jointly with the minimum nonfood expenses. The Gini Coefficient also proves there is a heavy social situation in Georgia. According to GeoStat, the National Statistics Office of Georgia, the Gini Coefficient makes up 0.48 in our country, based on the total expenses. When the Gini Coefficient exceeds a 0.40 point, this signifies a large incomes and property imbalance, specialists noted. Not only in Europe, but also in the Post-soviet space, Georgia is a sole country, where the difference between incomes is enormous.

The Resonance