Page 37 - GEORptDec21

increasing amount of debt is being taken on by the poorest Georgians, for whom it can exacerbate their precarious situation, a 2018 World Bank study found.
In the richest European countries, such as France and Germany, banks do offer household loans at an average interest rate of 4%, while in Georgia it’s a steep 17%, according to National Bank data. Payday loan companies offer even higher interest rates in exchange for lax credit history checks, luring many Georgians into a debt trap.
Given the country’s meagre pensions, elderly Georgians – unless they are supported by their children – usually need to borrow money just for day-to-day expenses. About half of retired Georgians have bank loans. And the institution that has a virtual monopoly on the distribution of pensions, Liberty Bank, also charges a whopping 31% annual interest rate to borrowers on pensions. Because they have steady, albeit small, incomes, Georgians on pensions are often the only members of poor families who are eligible to get credit at all. That means they borrow on behalf of the entire family, as well as to pay for their own medication. On average, Georgian pensioners spend between 65 and 80 lari ($20-25) a month servicing debts, Mikheil Svanidze, a Tbilisi-based sociologist, told Eurasianet.
While debt had been a significant problem for financially vulnerable Georgians before 2020, with the arrival of the COVID-19 pandemic the country’s entrepreneurs were hit, as well.
7.0 FX
Georgia - Foreign exchange rate
2015
2016
2017
2018
2019
2020
Q1 2021
Q2 2021
Currency (units per EUR) (average)
2.520
2.617
2.832
2.991
3.155
3.552
3.998
4.008
Currency (units per USD) (average)
2.270
2.367
2.509
2.534
2.819
3.110
3.314
3.327
Fragile improvement in GDP and tourism data fuels Georgia’s currency
Georgia’s currency, the lari (GEL), placed under pressure over the past coronavirus-hit year due to the sudden plunge of forex inflows generated by tourism, is strengthening, apparently supported by good economic figures (+46% GDP in April, according to a flash estimate), particularly in the tourism sector.
The GEL has strengthened to 3.08 GEL to the USD in a run over three consecutive days to stabilise at around 3.15, a major improvement compared to the 3.45 values seen in May when the currency was losing further ground.
A report on tourism in May showed 104,700 visitors arrived in Georgia, marking a monthly record since the beginning of the pandemic.
The flow of visitors was 180% higher y/y, but the figure should be adjusted for the low base, as the country was under lockdown in May 2020.
Despite the relative recovery seen in tourism, its volume amounts to 85% less than was seen in the pre-pandemic period, looking at May 2019.
Also, it is not only that the impressive April GDP expansion (+19% versus April 2019) visibly overstates the state of the country’s economy, the recovery in tourism is still iffy and fragile compared to the pre-crisis basis. It is expected
37 GEORGIA Country Report December 2021 www.intellinews.com