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GEL - National currency to strengthen

By Natalia Kochiashvili
Wednesday, February 26
The US $1 Bloomberg trading system is currently trading at GEL 2.7863, the strongest exchange rate in the last 7 months.

The GEL stabilization has picked up pace over the past few days. After February 17, the exchange rate against the dollar has turned stronger by more than 7 Tetri.

According to Bloomberg Trading System, the stock opened at 2.80 on February 25, later falling to 2.7863.

This is not an official exchange rate yet, but it will affect the official Lari exchange rate as well. According to the National Bank of Georgia (NBG), as of February 25, the official value of one US $ is 2.8079 GEL and one ˆ is 3.0370 GEL.

The national currency also strengthened against the Turkish lira and depreciated against the pound. Courses gained from Tuesday’s trade will take effect from today, February 26.

Giorgi Tsutskiridze, an expert in banking and finance commented on the news, speaking of both positive and negative factors from the past year.

The economic growth was significantly improved by 0.6 points, composing 5.2% - the highest in the region. This was driven by such an important factor as net export growth. Exports in general increased to 3 billion 777 million in 2019, the highest in recent years.

Compared to last year, the export surplus amounted to half a billion, half a billion more left in the country's economy. This reflected positively on the trade balance. According to Tsutskiridze, all of these factors, net exports, economic growth, trade deficits, and current account deficits, are directly affecting the exchange rate, since when they improve, the pressure on the GEL decreases.

According to the expert, the budget was executed over revenue. This has allowed the government to invest more money in capital investments, which has also played a positive role in economic growth.

“These factors persist today. That is why the GEL goes back to its natural equilibrium,” noted Tsutskiridze.

The expert suggests that the Lari rate will maintain stability unless an external, global factor is found provoking GEL rate.

On the other hand, economist Akaki Tsomaia says the GEL is moving in its range - either solidifying or weakening; it tends to stick to the moment. Tsomaia is not sure that this trend will be maintained.

He explained that it is always a misconception that if a major investment comes in, the GEL should stabilize, but many factors lead to the fluctuation of the exchange rate, including monetary policy, which tightened after the exchange rate began to tighten. Tsomaia also noted that the volume of imports in January and February is not very high, affecting the lari rate.

He says that the upward trend in exports and the relative decline in imports is likely to have a positive effect on the GEL, however, we should not be comforted by it, since no one knows what spring is going to bring with it. Tsomaia added that trade relations with China will probably decline, which will affect import flows. According to him, it is unfortunate, but there are no significant economic changes in Georgia, for example, the lack of jobs.

Otar Nadaraia, the chief economist of TBC Bank, told the First Channel that their forecast on the strengthening of the national currency was justified. He said that along with other factors, the monetary policy has played an important role in strengthening the Lari, noting that on the one hand monetary policy was tightened and on the other hand, the reserve demand for foreign currency funds decreased.

The chief economist at TBC Bank says it is difficult to make an accurate forecast, though the price of one US $ will likely be within the range of 2.82 GEL a year.

He said that the dollar has strengthened in the world and, unfortunately, the currencies of our major trading partner countries have weakened. He noted that the GEL did not weaken because it was already weakened more than it should have been. “Nowadays, we think that one USD will be within 2.82 GEL, but if the Euro, Lira, and Ruble strengthen against the USD, we think the GEL will strengthen even more,” said Nadaraia.