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Georgian Lari Started “Traditional” Depreciation in November

The official rate of the Geoegian national currency against  US dollar established at 1.8217 that is  0.0279 points deteriorated index compared to the previous day. US dollars can be sold for GEL 1.81 in exchange booths and bought for  GEL 1.83.

A week ago, on November 18, price of one dollar was GEL 1.7641.

This year the depreciation of GEL “traditionally” began in November.

For comparison: exactly one year ago the official rate of the national currency against US dollar was established at 1.6757, but afterwards GEL  started   depreciation and   by the end of January crossed the 1.78 mark. Over the coming months, the rate varied between 1.75 and 1.72.

A few days ago, on November 19, the National Bank Vice-President Archil Mestvirishvili made a statement regarding the GEL exchange rate; according to him, “the rate will be so as it should be, as the economy will determine.”

When asked if he sees problems by the end of the year due to the GEL devaluation, Mestvirishvili said that he saw no problem.

Experts forecast and compare this year’s trends with last year: Irakli  Lekvinadze says  that in the October-January period, the exchange rate of GEL against the US dollar fell 6.5% causing the influenceat the price level, spending policy was the main problem last year which increased the money supply incirculation, zero level of  inflation was recorded last year and a process was less severe in terms of pricing. The National Bank used reserve funds to mitigate sharp fluctuations.

The rate will  balance in February at  a new equilibrium of 1.75.

“Unfortunately, we are facing the same problem at the end of this year. The increased costs at the end of the year  affect a decrease in the rate and at the stage a falling rate is within  4%. However, apart fromspending policies,  reduced exports in the last 3 months, reduced remittances in the last month, an increase in imports,  3% strengthening of the US dollar against the euro,  reduced tourist flow and income, which is a seasonal factor for  this period, are among the  important factors.

We have no information about the investment flows. However, a significant change is not expected in this regard with respect to the previous quarter. Also we should  not forget the impact of the international economic processes. There is a shortage of US dollars in Ukraine and Russia which could be a factor causing  the weakening of GEL, “- Lekvinadze notes , but in spite of the ongoing process, doesnot see any reason to panic and is convinced that the rate will be reduced and balanced.

“I advise people not to hurry to convert GEL to other currencies as they  may be affected, since the ratewill be decreased  and balanced. The process is manageable, and the National Bank has all the resourcesto control the process,”- Lekvinadze adds