Compared to October 2016, the overall CCI turned towards the negative, going down by 0.7 points, from -10.8 to -11.5. The present situation index decreased by one point, from -14.3 to -15.3, and the expectation index went down by 0.6 points from -7.2 to -7.8. This may herald a reversal of the overall positive tendency we have observed since the beginning of the year, or it may be just another interruption of the positive trend (the first such interruption took place in August 2016).
POST-ELECTION BLUES?
In the previous month, we attributed the upsurge in the overall CCI to the pre-election phase. As observed in many countries, enthusiasm often gives way to disenchantment after elections. Indeed, females and highly educated individuals, who were the main drivers of the increase in September, are now primarily responsible for the negative turn of this month. In contrast, males and those with a lower level of education did not become overly enthusiastic in the last month, but they did not experience a hangover after the election.
THE LARI DEPRECIATION
Beginning on October 23rd, the Georgian lari started a downswing, losing more than 5% of its value as measured in dollars, and about 4% of its value if measured in euro. This depreciation is likely to be another factor driving the CCI down, as consumer confidence in a country and its currency value are highly correlated. As can be seen when looking at individual questions, November saw a deterioration in people’s expectations for making major purchases and for savings, and compared to the previous month, people are less optimistic about the future stability of prices. Both findings square very well with the hypothesis that the lari depreciation contributed to the recent CCI decline.
TABLE 1: MONTHLY AND YEARLY CHANGES IN THE CCI VARIABLES
The CCI went down from -19.5 to -23.5 (-4 points) in Georgia’s regions, while in Tbilisi it increased from -7.2 to -6.4 (+0.8 points). Thus, the gap between Tbilisi and the rest of Georgia, which has widened since the summer, has now reached a maximum of 9.8 points. Perhaps Georgia’s rural citizens expected more election gifts from the government, and now realizes that elections are over and the economic stimulation was mostly a flash-in-the-pan.
