“Georgian Lari is very exposed to the events occurring in Russia and Ukraine”
03 September, 2015
“Georgian Lari is very exposed to the events occurring in Russia and Ukraine”
A s the world economies are still recovering from China stock exchange drop scare and here in Georgia our national currency continues its alarmingly unstable fluctuation, Anna Kalandadze of VOA’s Georgian service sat down with Paulo Mauro, senior fellow at Peterson Institute for International Economics, Washington DC, to discuss the impact China’s economic woes could have on Georgia’s marginally more woeful economy.

Read the Georgian versi
on of the article on Voice of America website.

“When it comes to the impact on other countries, China is the second largest importer in the world, so that is why a significant drop in the Chinese economic growth - hypothetically speaking - would notably influence other countries.“
– How would you describe the recent events on the global stock market and what impact did they have on the global economy and individual countries?

– Black Monday on August 24 was the largest drop at the Shanghai Stock Exchange to happen in a single day. It has occurred over the previous few days as well, but on Monday it affected worldwide stock markets. But we have to go back and remind ourselves where this started: In November 2014, China’s stock exchange started to rise very rapidly, essentially doubling in value from November to June 2015. There was a decline in June, then it stabilized a bit, then declined again and now we are all seeing that it is normalizing after a drastic drop. There is still some up-and-down volatility but there is a sense that things have somewhat stabilized.

When it comes to the impact on other countries, China is the second largest importer in the world, so that is why a significant drop in the Chinese economic growth - hypothetically speaking - would notably influence other countries. The good news is that this burden would be evenly shared by individual countries: Exposure to the Chinese economy is higher now than several years ago, but it varies depending on country. Highly exposed countries that export to China in significant volumes are merely a handful. Besides, Korea, Australia and Japan have significant reserves that they can draw on if something happens. And then again, we are not there yet, since we have not seen reports on the slowdown in growth of the Chinese economy.

“If I was asked to appraise the situation in Georgia, I would probably not go looking at the developments on Chinese or worldwide stock markets, but would instead consider what is going on closer to Georgia. “

– Can there be any connection between what has happened at the global stock market, the crisis in China and the situation in Georgia with its GEL?

– If I was asked to appraise the situation in Georgia, I would probably not go looking at the developments on Chinese or worldwide stock markets, but would instead consider what is going on closer to Georgia. It is very exposed to the events occurring in Russia and Ukraine and how markets interpret that. Georgia has a large current account deficit, so maybe the exchange rate developments have to be viewed in that context. More generally, what is going on in China is leading people to rethink attitudes towards emerging markets. By the way, I do think that these markets are where the big economic growth will come from in the next 20 years or so, but right now there is uncertainty.

Read the Georgian version of the article on Voice of America website.

By Anna Kalandadze, VOA Georgian Service

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