Georgian national currency has no grounds to become stronger
15 September, 2011
Georgian national currency has no grounds to become stronger

Increase of Georgian national currency rate this summer is a temporary event caused by international trends and it doesn’t speak of a long-term strengthening of Lari  as no economic factor determines strong national currency  in Georgia. 

Exchange rate of Georgian national currency Lari  increased by approximately 2.3% and 1.2% against Euro and US dollar respectively starting this past July to end of August. The exchange rate of Lari fixed at GEL2.40 against EUR1 on July 1st, 2011 crept up by 14

percentage points in two months and reached GEL2.26 to EUR1 by September 13, 2011.

US dollar depreciated by 2 points against Lari from GEL1.66 against 1USD fixed in July to 1.64 by middle of August. The change was not significant at first sight but the important factor was that the rate remained unchanged during a fortnight till September that happens quite seldom at Georgian currency market where rate of national currency changes almost daily by one-two point up and down.

Georgian Lari became stronger against Great Britain Pound (GBP) lately. The rate fixed around GEL2.71 against 1GBP by middle of July started falling in September and dropped by 8 percentage point [to GEL 2.63-GBP1] in two weeks.

Starting September Lari strengthened against the Swiss Franc (CHF) as well, that is the strongest currency at the international market today after depreciation Euro and US dollar and that was kept high against Lari unlike Euro and US dollar in this past July. Georgian currency rate depreciated from GEL 1.99 against CHF1 to GEL2.28 against CHF1 by mid July, however since September Lari went up by 0.4 point and reached GEL 1.88 against CHF in two weeks.

Georgian economic analysts think the recent appreciation of Georgian national currency is a temporary event caused by international not local market trends as depreciation of Euro and US dollar at global markets pegged up by fears on possible US default and underway debt crisis in several EU countries that affected Euro exchange rate. Economic analysts believe the international currency market will become more stable by end of this fall and many national currencies including Georgian Lari will depreciate as no economic factor lays ground to keep Lari high.

According to Levan Kalandadze, economic analyst, Georgian national currency exchange rate is held artificially by central bank and it has no reasons to be as high as it is today in spite of depreciation of Euro and the US dollar on which the import-dependent Georgia relies. Kalandadze assures Georgian national currency rate is defined by government that has its business interests in import rather than market.

“Our currency market is shaped out not in compliance with the international market trends but with Georgian government’s rude interference policy,” he told Georgian Journal.

Kalanadze expects increase of prices and depreciation of Georgian Lari soon in spite of the temporary price slump on food product caused by reduced oil prices and high crop this year. The point is that demand on food product is increasing and Food and Agriculture Organization of the United Nations (FAO) has already predicted a 30% price-growth on food.

Irakli Lekvinadze, an economic analyst, also expects Lari depreciation but not too much. According to him,  as far as the local economic factors look unfavorable to currency rate it will be fluctuating between GEL1.7-1.75 against US dollar by end-year.

The point is that Georgia suffers from big trade imbalance and lack of investments that affects the currency rate. Irrespective of 25% increase in export in the second quarter of this year import in Georgia is three-fold higher than export. Inflow of Foreign Direct Investments (FDIs) [one of the most important factors influencing the currency rate] shrank sharply since 2008 crisis and August war. USD 203 million of FDIs entered in the second quarter of this year in the country that lags behind the past year data USD 208 million [that was also insignificant] by 2%.

Meantime, according to National Bank of Georgia (NBG), Georgian national currency real effective exchange rate and nominal effective exchange rate became by 15.3% and 8.7% stronger in this past July compared to July of 2010 that means that inflation rate in Georgia’s neighboring countries is much lower than in Georgia that stood at 8.5% in July. Inflation rate in the similar period was fixed at 6.3% in Armenia, 7.6% in Azerbaijan, and 6.3% in Turkey.

According to Kalandadze, the reason is that NBG holds national currency rate high artificially to cut down inflation rate that is correct but not enough as far as the inflation rate reduces on paper alone as in actual life price-hike on food and service is a matter of fact.

“The NBG holds the national currency rate high to cut down inflation rate but it cannot last too long because we have no economy, we depend on import by 75% without any progress just like we depended a decade ago. It means our dependence on foreign imported goods did not improve and the currency rate must remain unchanged.”

Other Stories
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
10 Reasons to buy an apartment in the suburbs
There is a tendency for Tbilisi dwellers to move from central parts of the capital to the suburbs.
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
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
April 2019
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