TBC Capital has updated its outlook from the Chief Economist regarding the expectations for the GEL exchange rate.
"We can now say that there is no additional pressure on the GEL, i.e. all the stress from foreign currency purchases has now fully been priced in.
We lower our end-of-year GEL forecast from 2.80 to broadly neutral around its current value of c. 2.73, which, while only a marginal difference in numerical terms, still reflects a shift of our judgement regarding the GEL.
Simultaneously, we do not believe in pronounced GEL appreciation either, even if sentiments were to completely reverse, based on several arguments.
Regarding the GEL seasonality, we stick to our view that, in recent years, the pattern is less evident as, once again, the pricing in behavior is relevant in this case as well.
An improved outlook for the GEL and a lower Fed rate implies further room for the NBG to continue easing, with a 25 basis points cut now more likely at the December meeting.
As for the TBC coincident indicators, non-cash spending has maintained momentum in October and the first week of November, with our nowcasting model indicating c. 9% economic growth in October, though this time with a relatively higher range of 7.7-10.2%.
Impressive export performance coupled with our nowcasts of tourism revenues suggest continued strong net inflows in October, although it is the choice between waiting and reversing that will be of primary importance for the GEL going forward", - the document reads.
