On 29 May, the exchange rate of the Georgian national currency, Lari (GEL), hit a record low against the US dollar, falling to 2.7997 GEL to one US dollar, reported civil.ge. The GEL’s previous all-time low of 2.7846 per U.S. dollar was recorded in December 2016.

The sharp depreciation of the Georgian currency begun in November 2018, when it fell by 15 Tetri against the USD during one month. As a reason for the depreciation, the National Bank of Georgia named the political tensions following the presidential elections in the country as the main driving force. It was afterwards followed by a period of appreciation, hovering around 2.65-2.69 during five subsequent months, only to start slipping again by the end of March, 2019. As of March, the GEL was trading at 2.7 USD.

Many economic experts linked the national currency depreciation to external factors generating negative expectations. According to them, the most influential external factor is the depreciation of the Turkish Lira, which prompted the market players to accumulate their reserves in US currency.

President of the National Bank of Georgia, Koba Gvenetadze, described the Lari depreciation as “short-term fluctuations”, saying that the economic fundamentals were sound and improving, but noting that it is impossible to have a full picture until the balance of payments data for the first quarter of 2019 is available. He also noted that “since the floating exchange rate absorbs shocks, it can be said -all other things being equal- that such depreciation will be followed by a period of appreciation.”