Minister Turnava: Further GEL Devaluation Not Expected

Georgia’s Minister of Economy and Sustainable Development, Natia Turnava, says that the Georgian national currency GEL (Lari) is not expected to further devaluate against the US Dollar and Euro, in the long-term perspective.

The Minister explained that the factors that impact the Lari exchange rate can be divided into two groups: macroeconomic and expectation. She says the macroeconomic parameter shows that the GEL rate will not depreciate in the long-term perspective.

However, she stressed that after Russia banned flights to Georgia, which will directly affect tourism, the largest sector of foreign currency inflow in Georgia, this negatively reflected on the exchange rate.

“Of course, political processes reflected on the currency, but we will work on this so that the problem is neutralized,” she said.

Following the Russian embargo imposed by the Russian President Vladimir Putin on June 21, Turnava met with the representatives of all commercial banks operating in Georgia.

The Minister discussed with the banking sector the establishment of a plan that will reduce negative impacts on the economy and particularly on the small and medium (SME) segment in the tourism sector.

“We are talking about the challenges that our tourism industry faces with commercial banks. It is possible to find various financial support schemes and financial products, including credit-guarantee mechanisms, to overcome the challenges we face at this point. Very soon we will be ready to offer our tourism industry a certain plan,” she said.

Moreover, ways of overcoming the challenges in tourism were discussed with the representatives of brand hotels.

“It is important that the field is balanced in evaluating the process since it is about revealing new opportunities for attracting tourists from different markets, as well as about maintaining the traditional (Russian) market,” she said.

Georgia’s National Statistics Office has released rapid estimates of the economic growth of January-May 2019, according to which the estimated real Gross Domestic Product (GDP) growth rate in May 2019 equaled 4.7% and the average estimated real GDP growth equaled 4.9% for the first five months of 2019.

Geostat says that in May 2019, the estimated real growth compared to the same period of the previous year was posted in the following activities: real estate, renting and business activities, trade, hotels and restaurants. A decrease was registered in manufacturing and construction.

Minister Turnava said the provided statistics are quite good, adding that so far the economic growth is high.

“However, we cannot predict if the economic growth will remain the same in the next months,” she noted.

Ivane Matchavariani, Minister of Finance, also spoke about the GEL rate, noting the situation on the local currency market is the reflection of recent developments and negative expectations seen countrywide in the past week.

“The expectations are certainly heavy. I hope these expectations will not come true in the full scale. What happens to the GEL today is unambiguously a reflection of the given expectations,” he said.

Matchavariani also noted that the National Bank of Georgia (NBG) is doing its best in this regard.

“I hope radicalism and hysteria will decrease soon, though there are grounds for them currently,” he added.

At present, according to the National Bank rate, one US Dollar equals GEL 2.8687 while one Euro costs GEL 3.2657.

By Thea Morrison

Photo source: agora.ge