13.Oct .2020 16:30

Increase in the Risk Premium and Negative Impact on the Exchange Rate – Vice Governor of NBG Explains

Increase in the Risk Premium and Negative Impact on the Exchange Rate – Vice Governor of NBG Explains
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In his latest interview with The CheckPoints, The Vice Governor of the National Bank of Georgia, Papuna Lejava, unpacked four main risks to financial stability identified by the NBG. One of these risks is an increase in the risk premium, negative impact on the exchange rate, and debt.
 
"What we are seeing, the risk premiums have not increased for Georgia materially. But if this is the case, this may withdraw the country's capital and may impact the foreign exchange rate. The Georgian financial sector's dollarization is quite high, which means that the borrowers are borrowing in foreign currency. If Lari depreciates further, this will impact the creditworthiness of these borrowers. On the other hand, today, the National Bank of Georgia is well prepared. Our reserves are at an adequate level. We will continue spending our foreign currency to support our local economy with more liquidity in foreign currency," - he said.
 
Lejava also spoke about the risk of a decrease in external demand and lockdown impact on tourism and other sectors that are connected to tourism.
 
" The risk primarily assumes further travel restrictions. Georgia was highly dependent on tourism in 2019 and the service sector. Of course, related service sectors are also impacted. If there are further travel restrictions and tourism inflows reduce, this will have an impact on employment in the country," - he said.