How financially literate are people in Georgia?

Note: This article first appeared on the Caucasus Data Blog, a joint effort of CRRC Georgia and OC Media. It was written by Koba Turmanidze, CRRC-Georgia's President, The views presented in the article are of the author alone, and do not necessarily reflect the views of CRRC-Georgia, or any related entity.

CRRC Georgia data suggests that about half the Georgian public has a basic understanding of interest and inflation rates.

Saving, spending, borrowing, or investing money are everyday decisions people around the world have to make. Making the right decisions requires a certain degree of financial literacy, which some scholars boil down to understanding the basics of inflation and interest rates.

In a bid to gauge the levels of financial literacy in Georgia, CRRC Georgia used questions developed by professors Annamaria Lusardi and Professor Olivia Mitchell to assess an individual’s understanding of inflation, interest rates, and investment.

Lusardi asked around 16,000 participants in a 15-country study the three questions for a 2019 study, which showed that around one in three people can answer all questions correctly and about a half can understand both inflation and interest rates correctly.

As Caucasus Barometer surveys have shown, people’s lives in Georgia are significantly influenced by inflation and interest rates. While very few people save money in Georgia, people borrow intensively. Notably, since 2015  between one in five and two in five Georgians have named inflation as a top issue in the country. 

With this in mind, CRRC Georgia adapted and replicated two of the questions developed by Lusardi and Mitchel — particularly those about inflation and interest rates.

In a January 2022 Omnibus survey, Georgians were asked to imagine that they had an account with $100 in it, and that the account paid a 2% interest rate. They were then asked whether, after five years, there would be more than $102, exactly $102, or less than $102 in their bank accounts.

The second question measured people’s understanding of inflation: again, people were asked to imagine they had a sum of money in their bank account with an interest of 1%, while prices of goods would increase by 2% annually. The respondents were then asked whether they could buy their usual groceries with the same amount of money over time, or if they would pay more or less.

The majority of the public answered each question correctly. Nearly two-thirds (61%) understood interest rates correctly (8% incorrectly, 29% were uncertain, and the remainder refused to answer), and 64% understood inflation correctly (10% incorrectly, 25% were uncertain, and the remaining respondents refused to answer the question). Overall, 51% answered both questions correctly, 26% at least one correctly, and 24% both incorrectly or with uncertainty.

The most important factors associated with financial literacy are education levels and ethnicity. 

Individuals who are more educated are more likely to be financially literate: those with technical education 10 percentage points higher, and those with tertiary education 21 percentage points higher than individuals with secondary education or lower.

Ethnic Georgians are 28 percentage points more likely to answer financial literacy questions correctly than ethnic minorities. 

Notably, internally displaced persons are less likely to understand inflation rates correctly than non-IDPs, but understand interest rates at similar levels. 

Other factors, such as gender, age, having children in a household, employment status, and wealth, are not associated with financial literacy.

When compared with other countries, where similar questions were asked, the results from Georgia show significant similarities and differences. While about 50% can answer both inflation and interest rate questions correctly, just like in other countries, the Georgian data does not confirm gender and age differences documented elsewhere. In contrast, having lower educational attainment and being an ethnic minority is associated with less financial literacy in Georgia. 

The data used in this post is available here.

How has Georgia changed in the last decade?

Note: This article first appeared on the Caucasus Data Blog, a joint effort of CRRC Georgia and OC Media. It was written by Givi Silagadze, a Researcher at CRRC-Georgia, The views presented in the article are of the author alone, and do not necessarily reflect the views of CRRC-Georgia, or any related entity.

A recent survey suggests that Georgians tend to believe that poverty, crime, and corruption have increased in the last decade, while affordable healthcare has become more accessible. However, available public data does not always match these assessments. 

Recent public opinion surveys suggest that Georgians feel increasingly worried about where the country is headed. As of August 2022, less than a quarter of the electorate believed that Georgia was going in ‘the right direction’. 

While the overarching assessment is quite negative, the public’s views on specific issues is more variable, adding nuance to the picture. 

The August 2022 CRRC/NDI survey asked respondents how they thought things had changed over the last decade in Georgia, in nine key policy areas. According to the data, at least half of the public think poverty, crime, and territorial integrity have worsened over the last decade.  In contrast, the public was most positive about progress in terms of affordable health care and freedom of speech, with roughly a third of the public believing the situation had improved for both issues.

While two thirds of the public think that poverty has worsened, World Bank data suggests that poverty in Georgia has declined over the past decades. Although there are ups and downs in the data over the years, there has been a decline in the share of Georgians living on under $6.85 (converted into purchasing power parity) a day, from 66% in 2012 to 58% in 2020. The percentage of Georgians living in poverty did, however, increase in 2020, likely in response to the pandemic. A similar trend is present for the $2.15 poverty line (converted into purchasing power parity), with declines from 11% to 6%.

Roughly three in five Georgians (57%) believe that crime has worsened over the last decade. Official statistics seem to confirm people’s negative views, with Georgia registering 56,300 crimes in 2021, compared to less than 40,000 ten years prior. However, in 2018 the Ministry of Internal Affairs changed its crime recording methodology in a way that meant that a greater range of crimes were recorded. As a result, it is not possible to unequivocally claim that crime has substantially increased over the last 10 years.

Two in five Georgians think that corruption (43%) has worsened in the last decade. However, the Corruption Perception Index (CPI) suggests that corruption has not varied much over the last decade, with a slight improvement from 2013-2018 and slight decline since.

With regards to education, 40% of the public feel it has worsened. But data from the Programme for International Student Assessment (PISA), a study intended to evaluate national education systems, suggests that Georgia has slightly improved its scores in the last decade, albeit with a slight decline since 2015. 

Some of the most positive public assessments were for affordable healthcare. About a third of the public (36%) believe that the situation around affordable healthcare has improved in the last decade. Data from the World Health Organisation appears to corroborate this, as it suggests that domestic private health expenditure in Georgia has declined as a share of total health expenditure from 77% to 59% of spending. However, it must also be noted that lesser private and greater public expenditure is no guarantee of better quality health care services. 

In terms of freedom of speech, a third of Georgians believe that it has improved over the last ten years. Data from the Varieties of Democracy project suggest that Georgia’s scores did improve in 2012-2013, but have declined since 2016. 

As for the court system, roughly one in three people (31%) think it has worsened over the last decade, but the Varieties of Democracy project suggests that Georgia’s score on the rule of law index has not changed since 2008. 

The public tends to think that the situation in Georgia in terms of poverty, crime, and territorial integrity has worsened over the last decade, while feeling most positive about freedom of speech and access to affordable healthcare. However, these sentiments are not reliably supported by publicly available data on the issues.