National Bank President gives reasons for GEL devaluation

President of the National Bank of Georgia (NBG) Koba Gvenetadze says the recent devaluation of the national currency GEL is caused by external shocks and reduction of the number of tourists in the country, after Russian travel ban took effect on July 8.

“Georgia is going through an external shock. Expected number of inflows has been reduced in Georgia. It is clear, according to the figures that fewer tourists come to Georgia. This, of course, affects the exchange rate,” he said.

The NBG President says he knows it is a painful process for the country and understands people who have been affected by the national currency depreciation.

As shocks are always expected for a small open economy, the most important direction is de-dollarization. If the income is in the national currency, the loans must be in the national currency as well. It is the best prevention to ensure the damage is less,” explained Gvenetadze.

According to him, Georgia once had a similar volatile period in 2014-2016.

“Even in that period there was economic growth, and unemployment in the country did not increase,” he added.

Gvenetadze noted that the overall macroeconomic environment in the country is positive. According to him, the National Bank is not planning any interventions at this stage and is monitoring the processes and will use the tools at its disposal if necessary.

However, he said that if the NBG sees that the exchange rate results in inflation, the National Bank will use all the tools to eliminate the risks.

“When we talk about inflation, we look at the inflation forecast and not the current level. We are observing a nominal effective exchange rate, and we will use our available instruments if needed,” said Gvenetadze.

One of the instruments of the NBG is the international currency reserves, which is the largest asset in its balance sheet. As of July, the volume of reserves is approximately $ 3.5 billion.

As of July 30, NBG says one USD dollar costs 2.9346 GEL, while one Euro is GEL 3.2642. Exactly one week ago, one Euro was GEL 3.2357 and one dollar GEL 2.8831.

Commercial banks are already selling one dollar for three GEL while at the Bloomberg Trade Terminal; the rate of one dollar is GEL 2. 9513.