Koba Gvenetadze spoke about monetary policy and macroeconomic forecasts at an online meeting organized by IDFI

Koba Gvenetadze spoke about monetary policy and macroeconomic forecasts at an online meeting organized by IDFI

31 March, 2021
At a meeting organized by the NGO Freedom of Information Development Institute (IDFI), Koba Gvenetadze spoke about the macroeconomic forecasts and the monetary policy as well as discussed the challenges that the Georgian economy is facing today. The event is part of a discussion cycle that covers the following topic: "Economic Challenges and Opportunities in the period of the Covid-19 Pandemic".

The Governor of the National Bank of Georgia spoke about the shock caused by the pandemic and the consecutive macroeconomic policy measures that help the country to overcome the difficulties.

He highlighted that the ongoing unprecedented circumstances have had a notable negative impact on the country's foreign inflows, foreign exchange market, inflation, and economic activity in general. He also drew attention to the current situation - the pandemic situation continues, and along with the current developments in Turkey, creates excessive fluctuations in the foreign exchange market. In such situations, excessive depreciation of the exchange rate - so-called "overshooting" - is generally followed by a reversal of the exchange rate, which, in turn, will be supported by the readiness of the NBG to intervene on the FX market. The NBG Governor has also spoken about the importance of a de-dollarization policy, which becomes even more crucial in times of similar shocks. "The exchange rate flexibility is a necessary condition if a country wants to have an independent monetary policy and capital mobility. It is internationally recognized that the independent monetary policy and the capital mobility are essential preconditions for sustainable high economic growth for countries, including small open economies. Such sacrifice would bring larger loss for the economy in terms of income and employment, rather than the costs of exchange rate flexibility. De-dollarization, in its turn, helps us to reduce these costs, "- said Koba Gvenetadze.

High level of dollarization is one of the most important challenges for the economy of Georgia. Latest external shocks and the tendencies of the exchange rate makes it apparent that de-dollarization is essential.

If measures have not been taken in this direction in recent years, we would be facing a harder situation, and overall the economy would have suffered greater losses. The increased „larization" of individual loans is especially notable, which has protected individuals from the pressure of increased debt service due to depreciated exchange rate, as well as reduced the risks of financial stability," said the Governor.

The conference was attended by the representatives of the public sector, the private sector, international organizations, non-governmental organizations working on economic issues, and business associations. After the speech, the  NBG Governor answered the questions of the audience.