Georgian national currency depreciation may cure economy
05 December, 2013
 Georgian national currency depreciation may cure economy
The recent depreciation trend of the Georgian national currency, the Lari, affects the purchasing power of ordinary citizens, but it may cure the shrinking Georgian economy. Lately the Lari depreciated against the US dollar at the fastest rate since May 2011. It began the year at GEL 1.65 against USD 1; now the dollar costs GEL 1.69, a loss of 2.4%. The major drop – of 1.6% - came this past November, when during the month the Lari fell from
GEL 1.6690 to GEL 1.6967 against the USD.
This trend makes Georgian consumers nervous, since a price hike is impending. The opposition party and some economic analysts suggest that the sudden depreciation curve was artificially induced by the Georgian government economic team to avoid the imminent deficit in the state budget. Some economists predicted that by the end of October the state budget might face a shortfall ranging from GEL 500 million to GEL1 billion.
Another group of financial market analysts, however, believe the previous government propped up the Lari artificially, which had a negative impact on the economy - so it is high time to let the currency float free, even if it loses value.
“The Lari was held high artificially for years; it is the second highest currency in the region, after the Azeri one. All sensible countries except Georgia let their currencies devaluate to combat the crisis of 2008,” said Ditrikh Muller, a co-founder of Georgian Investment Group+. “The economic slowdown now underway is a result of deflation in the country, and to bottom out the deflation the depreciation of the Lari is necessary: it will give an impetus to inflation, economic activity, job creation and export, as the price in national currency will reduce. And of course the state budget will witness higher revenues as a result.”
Finance Minister Nodar Khaduri and the National Bank of Georgia both indicated that the recent devaluation of the Georgian national currency is a normal seasonal fluctuation, and the situation is under control. The NBG also ruled out speculations on account of artificial manipulation of the Lari as technically impossible.
Khaduri also denied manipulation of currency depreciation to fulfill the state budget. “The state budget [of 2013] was calculated on the exchange rate of USD 1 against GEL 1.7, by the way,” he said in an interview with Palitra TV, adding that there are no grounds for panic. The NBG currency reserves increased significantly, and it can interfere if necessary, he said, and conceded that exports are also increasing this year.
Lia Eliava, a financial market analyst, agrees that the current drop in the Lari’s value is insignificant, in fact, and a very timely remedy, but it also is obviously handy for the Finance Ministry that planned the state budget based on 4% inflation this year, whereas the country has experienced deflation since 2012. The next year’s budget is also planned on inflation, targeted at 5%. To this end, depreciation of the Lari is very timely. Otherwise, the next budget may also face a deficit.
“Very likely NBG is trying to get inflation by devaluation of the Lari,” Eliava said. “The point is that it immediately sends prices high and boosts inflation because Georgian businessmen who do not trust Lari much not only increase prices on imported products but also build high profit margins into the price to insure possible currency risks.” She approves of the Lari devaluation as a good move to revive the faltering national economy but fears that Lari depreciation alone is not sufficient, and will be burdensome to Georgian consumers’ pocketbooks.
Other Stories
Georgian business associations establish Georgian Tourism Industry Alliance
Business associations representing various sector of the hospitality industry in Georgia agreed to establish Georgian Tourism Industry Alliance (GTIA).
IMF approves $200 million for Georgia
The Executive Board of the International Monetary Fund has approved US$200 million financing to Georgia to address the effects of the COVID19 pandemic.
Georgia will be one of the first to open tourist corridors, Economy minister vows
Georgia’s Minister of Economy and Sustainable Development Natia Turnava pledged that Georgia would be one of the first countries to open safe tourist corridors with other countries.
Georgia’s GDP may contract 4%, the worst in the region amid pandemic
International Monetary Fund forecasts a 4% contraction of Georgia’s economy, which very much depends on tourism and money transfers.
Georgian retailers fight for survival as coronavirus pandemic continues
Pandemic has affected everyone worldwide, but one of the most vulnerable are retailers, those who depend on consumers and their spending.
Georgia remains the fifth in terms of budget transparency
According to the 2019 Open Budget Survey (OBS), conducted by the International Budget Partnership (IBP), Georgia got 81 points out of 100 in state budget transparency, the Transparency International Georgia said on Wednesday.
Georgia to receive €1.16 million for agriculture development
Within the GRETA project, the EU, Sweden and Austria launched the Local Development Initiative (LDI), to create great economic opportunities in the organic agriculture sector for farmers, farmer groups, cooperatives, processing units as well as other actors along various organic value chains.
Products rotten amid nationwide lockdown in Georgia
Food chain security is becoming more and more important as lockdown stays in place and farmers cannot transport their products from one place to another.
Georgian government to spend GEL 3.5 billion within crisis management plan
Georgian government has introduced a crisis management plan that consists of different stages. GEL 3.5 billion will be spent to cushion economy but this amount does not cover the post-crisis recovery period.
Georgia to receive €183 million from EU to fight Coronavirus
Due to the economic crisis caused by the pandemic of the coronavirus disease COVID-19, the EU has proposed a new package of macro-financial assistance.
Air traffic to be halted until May 22, GCAA says
Air traffic in Georgia will stay halted until May 22, 2020, Georgian Civil Aviation Agency says in a statement.
Georgian PM discusses support packages from ADB, EBRD
Prime Minister of Georgia Giorgi Gakharia held a video conference with the presidents of the EBRD and ADB regarding the possible assistance and financial resources to be allocated to Georgia due to the challenges associated with the global pandemic.
EBRD to provide €1 billion to Georgia, other countries
The EBRD and Georgia are stepping up cooperation as the country's economy faces the challenge of the coronavirus outbreak – says an official statement published on
Government closes ski resorts in Georgia over COVID-19
The season at the ski resorts of Georgia closes ahead of schedule, the Prime Minister’s spokesman, Irakli Chikovani, said at a briefing.
Georgia will export armored vehicle Didgori Warrior
A new Georgian armored vehicle Didgori, equipped with a 120mm mobile mortar module, will be exported under the agreement signed between the Military Scientific-Technical Center Delta and one of the countries of the Middle East, the Ministry of Defence said.
Korter: Reliable housing property data in Georgia
It's not a simple job to find fresh homes. But when you use the estate choice service Korter, everything becomes distinct.
Rent a car in Tbilisi –
Are you thinking of booking the best vehicles for your next trip at a very reasonable price? If yes, then this is one of the best decisions you can ever make for yourself.
Pleasant Sunday for the whole family – Renewed Sunday’s brunch at The Biltmore Tbilisi Hotel
Summer, the season of endless fun and vacations, has ended and Tbilisi has become a usually crowded city.
GEL devalues, officials show optimism though
Devaluation of the national currency has sent shockwaves among citizens in Georgia. Officials think that the trend will return to its normal frame, though.
ProCredit Bank’s 20 years of challenges and successes in Georgia and what it means to be a responsible bank
“The bank’s 20-year long presence in Georgia was marked by many challenges and success stories.
Comments on alarming GEL devaluation
The National Bank of Georgia set a new exchange rate, according to which, dollar price became GEL 2.9507 on Tuesday.
Euronews and Silknet sign an MOU to launch “Euronews Georgia”
Euronews and Silknet, Georgia’s leading telecommunications company, are announcing the signing of an MOU in view of launching Euronews Georgia, a news channel and digital platform aimed at a Georgian-speaking audience.
Green Diamond starts to hand over flats to owners as second stage of construction finishes
Second stage of construction of Green Diamond living apartments by MAQRO Construction has finished and process of hand over of flats to owners has started.
Georgian wine tasting in the US came off excellently
Georgian wine tasting in the main cities of the US, New York, Chicago, and Boston went off excellently.
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
June 2020
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30