The recovery of the Consumer Confidence Index, observed from May to July, has been losing steam in September and the November survey confirms that consumer confidence is struggling to go back to prior pandemic levels.
In November 2020, consumer confidence decreased by 3.4 index points (from -30.8 in October to -34.2 in November) with both sub-indices (the Present Situation Index and the Expectations Index) decreasing as can be seen from Chart 1.
November has seen some political uncertainty. The opposition rejected the election results and refused to accept mandates in parliament. There were some protests with people demanding new elections and these demands were rejected by the ruling party. Political uncertainty always triggers a dip in confidence and this is one of the explanations for the loss of momentum in the CCI.
Then, there is the corona crisis. In November, Georgia reported a record high number of new cases (up to 5000 daily). To curb the spread of the virus in the country, the Georgian government introduced more restrictions that will be in place until 31 January and this led to yet another downward revision of growth rate estimates for 2020.
Consumer confidence deteriorated less outside the capital city though (Chart 2). This could be attributed to a significant rise in domestic exports, mostly of agricultural products, which primarily benefitted people living in rural areas. In October 2020, domestic export increased by 21.2 percent compared to October 2019, especially apples, but also hazelnuts (up by 39 percent).
Not surprisingly, restrictions aimed at curbing the virus affected more the economically vulnerable groups which we proxy by considering those with secondary education and lower (Chart 3). Firstly, these groups have fewer opportunities to do their job remotely and, secondly, vital means of mobility for poorer people – public transport – was once again suspended.
This does not bode well for the immediate future. Beyond some lingering political tension, it is unlikely that COVID-19 restrictions will be eased any soon and we do not expect the CCI to rebound before the Spring.
BAR CHARTS: CONSUMER RESPONSES BY QUESTIONS
1. Source: Ministry of Economy and Sustainable Development of Georgia