iTV.ge | Chief Economist TBC Stock Monthly Macro Review

According to TBC operational data, after 7.5% in June, the economy will maintain strong growth in July and according to TBC Capital’s short-term forecast framework, the economic growth rate will remain around 7.3%. Against this background, inflation remains below the target. Moreover, in July, compared with the previous month, consumer prices fell by 0.4%, which, taking into account seasonal factors, is equivalent to zero inflation. The annual rate is 1.8%. However, the contribution of one-off factors is important, without which the recent inflation dynamics would be more or less close to the 3% target.

As for the Lari exchange rate, in addition to monetary inflows, sentiment traditionally plays an important role. In this regard, TBC Capital presents readers with a quantitative assessment of the joint impact of monetary inflows and sentiment. For example, in addition to factors such as tourism, the currency composition of loans and deposits and the index of the US dollar against other major currencies are taken into account. It is worth noting that the quantitative framework accurately reflects the historical, actual dynamics of the GEL-USD exchange rate, and our previous conclusions on the current valuation have not changed, so the base case remains largely neutral.

At the same time, developments in the Middle East, in addition to other geopolitical challenges, pose a significant risk to the Georgian economy, both in terms of foreign capital inflows and inflation. On the other hand, the impact of migration should also be considered. For example, in October 2023, there was a decrease in spending by Israeli tourists, but an increase in consumer spending by Israeli non-residents, which is associated with a certain positive impact of migration.

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