Page 40 - GEORptNov21

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 that the central bank will remain cautious at its June 23 monetary board meeting, when deciding whether to turn even more hawkish and push up the key rate from 9.5%.
The consumer price inflation rate in Georgia reached 7.7% y/y in May, at 0.5pp more than was seen in April and May and hitting the highest rate recorded in the past decade.
According to the tourism statistics, more than half of the visitors, some 52,688, entered the country by air in May. Land borders were opened as of June 1, which was broadly seen as highly encouraging, but the share of 70% visitors coming in across land borders might again overstate the impact in terms of tourism revenues.
According to an estimate by Galt & Taggart, Georgia will receive $1.2bn from tourism this year—still a major plunge from the €3.3bn in 2019.
"Opening the land borders from June 1 will facilitate the gradual recovery of tourism. Prior to the pandemic, in 2019, 70% of the total tourism flow was coming by land. We expect that in 2021, Georgia will receive $ 1.2 billion from tourism, which is 36% of 2019 tourism revenue,” the investment bank said.
Last year, Georgia lost tourism revenues of $2.7bn, as revenues from international tourism dropped to $542mn compared to $3.27bn in 2019.
It is also noteworthy that Galt & Taggart has raised its 2021 economic growth
40 GEORGIA Country Report November 2021 www.intellinews.com