November is typically the month when consumer confidence in Georgia reaches its peak. In previous years, an increase in the CCI was observed in October and November. This is normal due to the economic seasonality of Georgia, as was discussed in the previous month’s report. However, in November 2014 we observe a different pattern: consumer confidence has reached its historic minimum. The primary reason for this is probably the political tension and economic instability that was observed during the last month. Political battles within the government and the parliamentary majority impact consumer perceptions of the current situation and, more noticeably, negatively affect expectations, thus drawing down that index. The overall CCI has decreased to -18.4 points (down by 4.7 points from October). Both the Present Situation and Expectation indices have decreased to -20.7 and -17.1 points respectively (down by 4 and 5.4 points over the month). As November was typically the month that saw the highest CCI of the year, this year’s drop draws an even more dramatic picture in annual terms. The overall CCI has decreased by 17 points, which is the sharpest drop in the history of this study. The biggest fall of the year has been observed for both the Present Situation and Expectations indices.

The Present Situation index decreased by 15.3 points, while the Expectations index shows an even bigger decrease of 18.8 points. Such a large drop in expectations might reflect the general frustration of the public following the biggest political crisis yet faced by the 2012-2016 government. A few things to note: • As the decrease of the CCI and its components happened in the month when consumer confidence is typically at its yearly peak, the year-on-year comparison shows an overly pessimistic picture. • Consumer confidence decreased in both the present situation and expectations components, however, the decrease in expectations is larger (a decrease of 5.4 points versus a decrease of 4 points for the present situation). This strengthens the argument about the impact of political tensions. • Unemployment expectations have significantly changed over the month. In November, 39% of respondents thought that unemployment would increase, while 27% answered the same way a month earlier. • Respondents with higher education seem to be more optimistic than those without. A total of 44% of respondents with higher education answered that it is was the right moment to make major purchases, while only 23% of those without higher education replied in the same way. A big difference between educational groups is seen in the answers given about saving behavior: 45% of the higher education group thought that it was a good moment to save in November, while 30% of those without higher education gave the same answer. • The responses of females have not changed much over the month, with the exception of the question related to expected unemployment. In October, 29% thought that unemployment would increase in the next 12 months, while in November 42% of females thought the same. The expectations of male respondents saw a bigger change over the month. A total of 35% of male respondents in November thought that unemployment would increase in the next 12 months, while 25% thought so a month earlier. Furthermore, 42% of males thought that the general economic situation is expected to improve over the next 12 months, while 55% gave the same answer in October. • Answers from respondents younger than 35 significantly changed over the month. In November, 33% of these younger respondents answered that it was the right moment to make major purchases, whereas 49% gave the same answer in October. Furthermore, 23% thought that prices had risen a lot in November, while 17% answered the same a month earlier. Unemployment expectations have also risen a lot: in November 39% expected unemployment to rise, as compared to 24% in October. In addition, 45% thought that the general economic situation would improve over the next 12 months, while 52% thought so in the previous month. Regional Peculiarities Consumer confidence has decreased in Tbilisi much more than in the rest of Georgia (RoG). The CCI reached its historic minimum of -20.7 points (a decrease of 6.4 points) in Tbilisi and -17.1 points in the RoG. The Present Situation index is slightly lower in Tbilisi at -19.4 (a decrease by 5.4 points) than in the rest of Georgia, at -21.2 points (a decrease by 3.4 points). In contrast, the Expectations index in Tbilisi is much lower than in the RoG, standing at -22 points (a decrease of 7.9 points, i.e. the historic minimum) compared to -13 points (a decrease by 4.1 points). Tbilisi typically responds to political tensions and economic instability faster than the rest of Georgia. Based on past experience, Tbilisi citizens grow pessimistic towards the government faster than people elsewhere in Georgia. This is well illustrated by the larger decrease in both components of the CCI for Tbilisi. Furthermore, the very large decrease in expectations could be a sign of the dissatisfaction of Tbilisi residents. From an economic perspective, a slowdown in economic activity can be expected due to the large drop in consumer confidence, especially in Tbilisi. Looking at the responses given to separate questions, Tbilisi has shown a greater variation than the RoG compared to the previous month. Furthermore, bigger changes can be observed in answers about expectations in Tbilisi. In November, 40% of Tbilisi respondents expected the general economic situation to improve, while 50% gave the same answer in October. Unemployment expectations also increased in Tbilisi. Asked the question: “how do you expect the number of people unemployed in this country to change over the next 12 months” 42% answered that the number would increase, while 33% had given the same response a month earlier. In Tbilisi fewer people thought that it was a good time to make major purchases: in November, 35% of respondents gave a positive answer to that question, while 46% responded the same way in October. Several similarities can be observed in the responses from the RoG. Expected unemployment increased from 24% of responses in October to 37% in November. Compared to the previous month, a smaller number of respondents from the RoG thought that it was the right time to make major purchases. In November, 30% thought that it was a good moment to make major purchases, while 37% thought so in October. Comparing answers from Tbilisi and the RoG gives some insight into how the situation develops in the country. In Tbilisi, people seem to anticipate the present situation better and to be more pessimistic about the future, while in the rest of Georgia the pattern is the opposite. For instance, 35% of respondents from Tbilisi thought that November was a good moment to make major purchases, while 30% thought the same in the RoG. Interestingly, more respondents from Tbilisi thought that it was a good time to save (44%), than those from the rest of Georgia (33%). This comparison is counterintuitive given the fact that incomes in the RoG are more seasonal than they are in Tbilisi. This again proves that residents of Tbilisi are more responsive to political and economic instabilities.