The recent depreciation of the GEL’s exchange rate is linked to uncertainty caused by the coronavirus outbreak that has been transmitted to the financial markets through the channel of expectation. Such a statement released the National Bank of Georgia (NBG).

“The uncertainty regarding the coronavirus pandemic has increased significantly in recent days both at the international and regional levels. This uncertainty is transmitted through the channel of expectations to the financial markets, including the exchange rate, which is the result of the recent depreciation of the GEL after one month of the rate strengthening.

The depreciation was caused by several factors. On the one hand, the spread of coronavirus globally and in Georgia triggers the expected decline in tourist flows. At the same time, the decline in international oil prices indicates the decline of foreign demand from Georgia"s trading partners by oil export and possible decrease in money transfers. As a result, the risks of reducing foreign exchange inflows have increased, which has been reflected in the foreign exchange market through the channel of expectations. There is the same situation in the most countries in our region, where local currencies have declined in recent days. On the other hand, due to the restriction of air travel, the outflow of currency from Georgia to foreign countries will be reduced, as well as the import of tourism services will be reduced, which will have a positive effect on the exchange rate. At the same time, Georgia"s reliance on remittances from oil-exporter countries has been significantly reduced, which is also a positive factor”, -reads the statement.