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On 7 July 2016, the Prime Minister of Georgia, Giorgi Kvirikashvili, stated: "According to the latest World Bank classification, Georgia has been moved from the category of lower middle income countries to the category of upper middle income countries. We believe that Georgia has not advanced in this classification for the last 15 years."

verified the accuracy of the statement.

On 1 July 2016, the World Bank published a new classification of countries categorised in terms of incomes. The principal criterion in this classification to determine income is the gross national income (GNI) per capita which is calculated by the so-called Atlas Method. Usually, the GNI is calculated in the following way: we take the gross domestic product (GDP) of a given country, subtract the income which foreigners receive in that country and add the income which the citizens of the same given country receive abroad. The Atlas Method’s calculations, however, are complex in that they compare the economic performances of different countries. Specifically, its calculations consider the changes in currency exchange rates and the differences between inflation levels in different countries. The Atlas Method is used by the World Bank.

The World Banks divides countries into four groups: low income countries have a GNI per capita of less than USD 1,025, lower middle income countries have a GNI per capita in the margins of USD 1,026 to USD 4,035, upper middle income countries have a GNI per capita in the margins of USD 4,036 to USD 12,475 and high income countries have a GNI per capita of USD 12,476 and more.

In the 2016 World Bank report, ten countries changed their groupings. Georgia is featured among these countries. It was classified as a lower middle income country in the previous World Bank report whilst it is an upper middle income country in this year’s report. In spite of this, we highlight that Georgia’s GNI per capita in 2015 was less than what it was in 2014.

Georgia’s Gross National Income Per Capita

Georgia’s GNI has been rising annually since 2003 with the exception of only 2015. One of the reasons behind the growth is that the country’s GNI per capita depends not only upon the size of the economy but upon the number of the population as well. The universal population census of 2014 demonstrated that after 2002, Georgia’s population decreased by 700,000. The decline in the population accelerated the growth of the GNI per capita.

calculated what the GNI per capita would be if Georgia’s population had not shrunk. The graph illustrates that the decrease in the population significantly impacted the World Bank’s indicator. If the population had not shrunk every year, the GNI per capita would have been much lower and Georgia would have remained in the group of lower middle income countries.

The Prime Minister of Georgia also mentioned in his statement that Georgia has not advanced in this classification for the last 15 years. The World Bank started to process data about Georgia in 1991 when Georgia was a lower middle income country. In 1993, Georgia became a low income country. In 2003, Georgia returned to the group of lower middle income countries. In the period of the next 12 years, Georgia did not change its category. In 2015, we moved into the ranking of upper middle income countries. Of note is the fact that Georgia should have already been promoted to this category in 2013 when the GNI per capita was USD 4,240. However, according to 2013’s data, Georgia’s population was 4.4 million. Therefore, the World Bank took only the results of the 2014 population census into account for the 2016 report and corrected the data for 2003-2014 considering the trend of the decline in the population.

According to the World Bank’s data, Georgia has indeed moved from the lower middle income country category to the upper middle income country category. It is the first time that Georgia has been put into the group of upper middle income countries. The last time the country advanced in this classification was 12 years ago when it moved from the category of low income countries to the category of lower middle income countries.

Of note is that the population decline also contributed to the growth of the GNI per capita. At the same time, Georgia’s GNI per capita in 2015 decreased as compared to the GNI per capita in 2014. Therefore, taking this context into account, the Prime Minister’s statement is