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Dollar is returning to GEL3

By Natalia Kochiashvili
Thursday, June 4
The Georgian national currency has strengthened as a result of the June 3 trad,. The change in the exchange rate against the US $ was 3.56 tetri, as a result of which the official exchange rate of $1 against the new exchange rate became GEL 3.0416. In total, the lari has strengthened by 13.5 tetri against the dollar since June 1.

The lari also strengthened against the euro today, the change in the exchange rate was 2.79 tetri, as a result of which the value of Euro1 became GEL3.4087.

As for the pound sterling, the strengthening was 3.77 tetri, with the new exchange rate worth GEL3.8294 per GBP.

It’s interesting what factors could have led to the strengthening of the national currency in the period of crisis in the country caused by the pandemic and given that foreign exchange inflows have been significantly reduced.

As Otar Nadaraia, TBC's chief economist, told BM.Ge, the exchange rate of the lari is majorly affected by how the dollar is against other currencies: “Recently, the dollar has lost ground to the euro, as well as the Turkish lira and the ruble, and the lari is being heavily influenced by how the dollar is against these currencies,” he explained.

Another factor that Nadaraia mentioned, is the expectations, which, according to him, are not really positive, but better than they were, since oil prices are rising and the opening of the economy creates positive expectations.

Vakhtang Butskhrikidze, General Director of TBC Bank, believes that the strengthening of the GEL was caused by the new economic activity.

Nadaraia recalled the statistics of April, when the economy shrank by 16.6%, calling it unfortunate, yet saying that ‘it could have been even worse against the background of the challenge we have.’ He also spoke of the volume of remittances, which, according to the TBC capital weekly indicators, decreased in April by 42.3%, but has significantly improved in May.

According to the economist, all in all, it is too early to talk about great optimism, because the situation around us in the countries around us is not good yet. “However, in terms of opening up the economy, we have a small room for positivity,” he added.

Nadaria doesn’t think at the moment, that the international donor funds were decisive in the lari's strengthening trend in the last days, however, the expectation is, that the donors' money, which will flow, will be enough to compensate for the external shock and not to get a sharp depreciation of the lari,” he said.

According to the basic scenario of TBC Capital, a 4.5-5.5% decrease in the economy is expected in 2020. After a sharp drop in the second quarter of 2020, a gradual recovery and an increase of 4-5% in 2021 is expected.

Natia Turnava, the Minister of Economy and Sustainable Development. Turnava responded to the trend of strengthening the lari in recent days, explaining that Several factors affect the strengthening of the lari.

“One is our balanced macroeconomic policy, the balanced monetary and monetary leverage we use, and this is normal. It must be said that slowing down economic activity also plays a role,” she said, adding that this is a balancing process that will ultimately have a positive impact, as it will have a positive effect on the prices of imported goods and will ultimately help return inflation to its target.

Note that the National Statistics Office (Geostat) reported annual inflation in May - 6.5%. As Geostat explains, it was driven by price changes in food and non-alcoholic beverages, and transport services.