Why GEL Depreciates – Comments by National Bank President
Koba Gvenetadze, president of the National Bank of Georgia (NBG) has commented on reasons why GEL has deprecated over the past months. Negative expectations have driven the process mainly, he said.
“We noted from the very beginning that external shocks were expressed in information spread about flight ban and other supposed trade sanctions. As a result, society started thinking of expected exchange rate depreciation.
As a result of this information, part of citizens abstained from selling foreign currency, while another part intensified purchasing foreign currency. And the floating regime immediately reacts to similar shocks and absorbs them.
We see that amid the exchange rate devaluation, the demand for imports declines and the trade balance is improved more than expected. This factor balances the losses in tourism sector revenues.
Since the early indicator of trade balance is improved, this factor will make positive influence on future dynamics of the exchange rate”, Koba Gvenetadze noted.