The fourth wave of Covid pandemic decelerated the tourism recovery in August, especially when Israel considered enlisting Georgia among the red countries. As expected, the growth from Israel is back and overall September inflows remained broadly flat reaching 50.8% in USD terms compared to 2019, - according to TBC Capital.
TBC Capital reports, that unlike Tourism and remittances, trade in goods increased at a much stronger rate compared to their expectations, indicating to a higher than assumed September GDP growth. As per usual, the rebound led to the worsening of the trade balance – by 8.1% MoM and 31.8% YoY.
Overall, MoM change in currency flows from trade, tourism and remittances in September amounted to negative 73.5 mln USD (63.0 mln USD in seasonally-adjusted terms), which in this month was almost equal to the NBG’s intervention of selling 60 million USD on September 30.
On the GEL, also important that last week the lira weakened further. Should the GEL follow?
"Despite the fact that the historical correlation exists and the risk is considerable, not necessarily in our view. First, the overall REER is at its medium-term average as other trading partner currencies have a different pattern than lira. Second, high inflation in Turkey largely offsets lira’s nominal depreciation. Third, the real GEL/TRY has a long term appreciation trend as the GEL should strengthen in the long term due to the stronger per capita GDP and productivity growth in Georgia compared to Turkey, however, recent GEL appreciation against lira is around 18% higher compared to what the long term trend would suggest. Fourth, while the TRY/GEL has some impact on Turkey/Georgia’s trade balance, it appears Turkish imports are primarily competing with other imports as the impact on overall trade balance is not evident and overall, its more about growth rather than the exchange rate (see March 15 Macro Insights). Fifth, we stick to our view that 2021 the inflow-outflow balance is positive. And the last, but not least, with already very high inflation in Georgia, being strongly linked to the GEL, we don’t think there is an appetite for the further depreciation.
We once again highlight the benefits of the multicurrency portfolio, for borrowings as well as for the savings, with the TRY and the RUB also in play", - TBC Capital reports.
