ISET

In August 2016, the average cost of cooking one standard Imeretian khachapuri increased to 3.15 GEL, which is 4.8 % higher month-on-month (m/m, that is compared to July 2016), but 9.6% lower year-on-year (y/y, compared to August 2015).

The most interesting finding emerging from the August data concerns price dispersion across Georgia’s major cities. Our data come from Batumi, Kutaisi, Tbilisi and Telavi, and, as is easy to see on the chart, not only are prices in all locations moving in tandem over time (this is nothing unusual), but also the gap between the cheapest and the most expensive cities (for khachapuri lovers, that is) reached an all-time minimum of 10-15 tetri per one khachapuri portion. This is far lower than the 40-50 tetri gap we have been observing through much of the Khachapuri Index history.

Why is this an important finding? Price conversion across space is a key indicator of economic development. The fact that prices for the same food products become more or less equal in different cities suggests that Georgia as a whole is becoming a single, well-integrated market. And an integrated market is a boon for everybody. In an integrated market, both consumers and producers benefit from lesser price fluctuations and fewer interruptions to the supply and sales of food and other products.

Incidentally, road infrastructure and market integration were the subject of a recent presentation by the Georgian PM, Giorgi Kvirikashvili. Indeed, the simplest way to promote market integration is to build better roads, reducing the cost of transportation from one market segment to another. Yet, improved road infrastructure is not a sufficient condition for full market integration. Once physical infrastructure is there, Georgia will also need an effective trade network spanning the entire country: a network of interconnected logistics, distribution, wholesale and retail operators able to quickly react to changes in local demand and supply conditions. Something to worry about in the future.

 

More Khachapuri Index Articles

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    The Khachapuri Index continued its upward trend in November 2017, with the average cost of cooking one standard Imeretian Khachapuri reaching 3.70 GEL. This is 1.8% higher month-on-month (compared to October 2017), and 7.1% higher year-on-year (compared to November 2016). In general, the increasing trend at this time of the year is driven by the seasonal decline in the supply of fresh milk, and excess demand before the start of the fasting period. This leads Read More
  • November 27 2017, Kh-Index | Khachapuri for Foreign Currency Earners

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    The average cost of cooking one standard portion of Imeretian khachapuri increased up to 3.63 GEL in September 2017. This is 5.4% higher m/m (compared to August 2017), and 6% higher y/y (compared to September 2016). According to official statistics, compared to the same month of the previous year the Consumer Price Index (annual inflation rate) increased by 6.2%, which is very close to our estimate in yearly terms, although monthly inflation (compared to August Read More
  • October 16 2017, Kh-Index | Those Who Seek Always Find!

    In September 2017, the average cost of cooking one standard Imeretian khachapuri varied across Georgian cities, from 3.33 GEL (the minimum observed in Tbilisi), to 3.85 GEL (the maximum observed in Telavi). The average price was 3.63 GEL, which is 5.5% higher compared to the previous month (August 2017), and 6% higher compared to September of last year. The least expensive city – Tbilisi – offers the highest savings for those “frugal housewives” who look for the Read More
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