"The GEL exchange rate is not affected by the rallies, but by the high degree of unpredictability of the government," economist Akaki Tsomaia told Business Morning.
For reference: yesterday, the government members attributed the lari's depreciation to political processes to opposition rallies.
Tsomaia believes that Lari should find a new equilibrium mark. He also explained in detail what is meant by the unpredictability of the government.
"The fact that there are many questions about the rigging of the elections is clear, it harms the business environment, and therefore it is unclear how businesses will continue their future activities.
It is also unclear what the future course of government will be and what lies ahead. It is uncertain how it is possible to do business in Georgia in the future.
Obviously, the degree of uncertainty is also increasing the pandemic - we do not know whether there will be a lockdown in the future. We shouldn't forget the tourism sector. The thought that economic recovery will be possible until the tourism sector recovers is unrealistic. We have an economic downturn, which means that the scale of our production and incomes are declining, and obviously, this is affecting the GEL exchange rate. The income is decreasing, and since the share of imported goods in the consumer basket is high, this is also reflected in the GEL exchange rate," Tsomaia explained.
The economist also focused on the NBG interventions, noting that spending the dollar affects only if there is a short-term fluctuation in the market.
"If we face the pace of economic decline, it makes no sense to spend dollars. The lari will still depreciate. The NBG should intervene only at the rate at which we received foreign currency grants. "When the NBG intervenes, it is often delayed, or its interventions fail to achieve the results it intended," Akaki Tsomaia said.
