The GEL depreciation has not yet been reflected in the interest rates of bank loans. Last year due to the depreciation of the GEL, loans issued in the national currency rose in price by several lari butthis year the banks interviewed by “Commersant” say that rates have not been revised.
According to VTB Bank, the rates of the loans issued in GEL remain unchanged and the demand for loansin GEL is still high. They say the demand has notincreased for loans issued in USD.
BasisBank says that the interest rates on loans did not change, because in their assessment, the rate depreciation is a short-term process and will not havean impact on loans.
Georgian national currency continues to depreciate – a process began in mid-November and continues today – the rate of the national currency against the US dollar was set at 1.84.
The country’s authorities explain the decline in GEL by a decrease in remittances from abroad, a decrease in exports, and some other factors.
In particular, in January-October 2014 Georgia’s foreign trade turnover amounted to USD 9.4 billion, which is 10% more than in the same period of 2013 – exports accounted for USD 2.4 billion (a 5%growth ), the import – 7 billion (+ 11%).
A volume of investments has also reduced – for two quarters of 2014 it amounted to USD 415, 8 million, which is 10% less than in the same period of 2013.
During 10 months of 2014, remittances from abroad amounted to USD 1.2 billion, which is 1, 9% more than in the same period of 2013.
According to the former Vice-President of the National Bank of Georgia Merab Kakulia, imports significantly exceed exports and for this reason the negative balance of trade increased by 15% in 2014.
Apart from that, he notes that the strengthening of the USD rate led to a weakening of the national currencies of Georgia’s trading partners – Russia, Ukraine, Turkey, which led to a rise in price of GEL against the currencies of these countries, which to some extent reduced the competitiveness of the country.
“The lack of inflow of foreign currency upset the balance of the financial market that under a floating exchange rate led to a devaluation of GEL. In addition, expectations associated with excessive public spending in the period remaining until the end of the year have a negative impact on the exchange rate – as it was last year. In particular, in November- December 2014 about GEL 2 billion are to be spentand this could have a significant pressure on the national currency. However, I hope that this will not happen – primary, because it is technically very difficult to do in such a short period, “- Merab Kakulia explains.
According to him, the national currency has not yet reached the new equilibrium point, but close to it, respectively, the process will not last long.
“The country has a floating exchange rate, and accordingly, the National Bank will not be able to keep the rate artificially, as this could lead to a sharp reduction in foreign exchange reserves of the country. Of course, this does not mean that the National Bank should not undertake anything. The National Bank’s interventions may facilitate GEL in finding a new equilibrium. In this regard, the National Bankhas already taken a number of steps, “- Merab Kakulia adds.
In November-December, GEL 2 billion in expenses are to be allocated from a budget, however, Kakulia suggests that only a small part of this amount will remain in the domestic foreign exchange market: first of all, because it’s technically unable to allocate some of the costs; secondly, a significant amount ofthe costs are used to cover the country’s foreign liabilities and are converted bypassing the market;thirdly, a large part of the costs return in the budget in a form of taxes and non-tax revenues. In the light of negative expectations, he notes, agiotage mood is created which obviously has a negative impact on the market situation.