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LARI CURRENCY DEFLATION IS SHORT TERM EFFECT

January 29, 2014

Bankebi da Finansebi

A representative of National Bank of Georgia (NBG) Giorgi Bakradze declares that those factors causing lari devaluation were all short-term. In the long-term period, we will inevitably have a trend of lari strengthening, he forecasts. Bakradze explains that in 2013, "budget could not spent money in the way it had to do", which caused "the entire expenditure to move mainly to the 4th quarter". During the year, lari had strengthening and NBG purchased more dollars than it sold and "pressure on deflation appeared only in the 4th quarter", he notes. At that, due to some slowdown in economics, NBG had conducted softened monetary policy, which "was added by activated fiscal policy in the end of the year", Bakradze points, adding: "both these factors are pressure on lari devaluation". Besides, import to export ratio was declining during the whole year, but at the end of the year, import increased by 20%, as well as demand on dollar, while all this causes devaluation, Bakradze notes.


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Source: Sarke Economic Press Monitor (Georgia)


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