Real effective exchange rate appreciates slightly in Georgia

Business Materials 18 December 2020 20:14 (UTC +04:00)
Real effective exchange rate appreciates slightly in Georgia

BAKU, Azerbaijan, Dec.18

By Tamilla Mammadova – Trend:

The real effective exchange rate (REER) for October 2020 in Georgia, appreciated slightly by 0.8 percent monthly and largely remained stable in yearly terms, Trend reports referring to ISET-PI, a think-tank based at the International School of Economics of Tbilisi State University.

Notably, the lari real exchange rate depreciated with respect to the euro and the US dollar by 0.6 percent and 0.7 percent respectively in monthly terms and by 10 percent and 5.5 percent respectively in yearly terms.

In contrast, REER appreciated with respect to the two major trading partners: Turkey (by 2.4 percent monthly and 17.1 percent yearly) and Russia (by 1.4 percent monthly and 11 percent yearly).

Depreciation of the REER is typically associated with domestic export goods gaining competitiveness on foreign markets, but it also translates into increased prices on imported goods. Overall, REER-related variables had a small negative contribution to the real GDP growth projections.

After a significant slowdown in remittance inflows in the beginning of the year, money inflows have been on the path to recovery since June. In October, remittances increased by 18.6 percent annually and reached $181.7 million. The recovery of remittance flows made a significant positive contribution to the growth forecast.

Tourism arrivals and receipts declined sharply as a result of numerous travel bans, as well as due to precautionary behaviors on the part of potential tourists. In October, the number of international visitors decreased by 92.5 percent yearly (driven by Russia [-17.1 ppts], Azerbaijan [-17.4 ppts] and Turkey [-10.2 ppts]), while the decline in tourist numbers (visitors who spent 24 hours or more in Georgia) amounted to 88 percent.

Overall, dramatically declining numbers of visitors and tourists, along with a sharp decrease in touristic spending, has made a significant negative contribution to the growth forecast.


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