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TBC Research talks coronavirus impact on Georgian economy

Business Materials 17 March 2020 18:24 (UTC +04:00)

BAKU, Azerbaijan, March 17

By Tamilla Mammadova – Trend:

The spread of coronavirus hits Georgia’s trade partners, among which oil exporting countries are affected the most, Trend reports with reference to TBC Research Group at Georgian TBC Bank.

Net investment inflows in Georgia decline further. Consumer and business confidence will recover only starting from the third quarter of 2020, said TBC Research.

"According to the baseline scenario, the second quarter inflows will be the most adversely affected. On a monthly basis, the greatest decrease is expected in April and May. The situation is expected to improve gradually and by the end of year-on-year growth in tourism sector will turn positive," said the TBC Research.

According to TBC Research, overall, in the baseline scenario, for the full year 2020, a 25 percent reduction in tourism revenues is assumed.

As reported, from the beginning of the year, the lari had an appreciation trend. As a result of lower inflows and depreciation expectations, the appreciation trend has reversed.

"We estimate the net loss in tourism, exports of goods, remittances and imports to total to $450 million," said the source.

Reportedly, besides decrease in currency inflow and lower oil prices, the decrease in imports is also caused by the worsened consumer and business confidence and respectively, lower domestic demand due to the overall impact of coronavirus.

According to TBC Research, declining inflows are compensated by increasing external debt, foreign exchange (FX) interventions and around the existing depreciation level of the local currency.

"In 2019, the undervalued lari resulted in increased inflation, followed by a sharp monetary policy tightening. In the first two months of 2020, inflation pressures eased as a result of exchange rate appreciation," said the group.

According to TBC Research, in the baseline scenario, inflation will be close to 2 percent by the end of the year, while policy rate will increase to 10 percent in the first half of the year.

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