The National Bank of Georgia (NBG) has published a review of conditions on the foreign exchange market. According to the National Bank, in March, compared with the previous month, the average exchange rate of the Georgian lari (GEL) depreciated against the US dollar from 2.6818 to 2.7188, a decline of 1.4%, whilst strengthening against the euro (EUR) from 3.1723 to 3.1460, a gain of 0.8%.

The NBG further reports that at the end of the month, the official exchange rate of the lari stood at 2.6998 against USD and 3.1032 against EUR. During the period in question, the maximum value of the GEL-USD exchange rate was 2.7470, whilst the minimum was 2.6759.

“In March, the minimum exchange rate deviated from the monthly average by a greater margin than the maximum. On average in March, relative to the dollar, the currencies of almost all of Georgia’s trading partners depreciated. A notable depreciation was observed in the Russian rouble. The euro, the lari, and the Turkish lira also weakened. The Armenian dram and the Azerbaijani manat, meanwhile, remained virtually unchanged.

The real effective exchange rate of the lari depreciated by 1.7% on an annual basis, whilst remaining virtually unchanged monthly. This depreciation is largely explained by the inflation differential between Georgia and its trading partner countries. As regards the nominal effective exchange rate index, it strengthened by 3.7% year-on-year in March and by 0.1% monthly,” the National Bank states.

The NBG’s report further notes that, in general, a depreciation of the effective exchange rate has a positive effect on the country’s competitiveness, whilst exerting upward pressure on import-driven inflation.

“Among Georgia’s trading partners, annual inflation in Turkey, Ukraine, Russia, Belarus, Azerbaijan, and Armenia was higher in March than in Georgia, whilst in the United States and the euro area it was lower. Against a backdrop of heightened global uncertainty and increased inflationary risks, the pace of inflation decline among major trading partner countries has slowed,” the National Bank’s report states.