September 2020 | CCI: The pandemic eats into consumer confidence
29 September 2020

The 2020 October parliamentary elections are quickly approaching. This could mark a turning point in Georgian politics as the country has embarked on the path towards a more proportional electoral system. We have been discussing the positive trend in the Consumer Confidence Index since May, and this is certainly in line with international research suggesting that an increase in confidence always occurs several months before elections, independent from the real economic conditions.

In September 2020, however, consumer confidence declined by 2.4 index points (from -31.0 in August to -33.4 by September). Although this has not affected the general trend since May, both sub-indices, the Present Situation Index and the Expectations Index, have contributed to the decline (see Chart 1). It is therefore likely that the movement of the CCI reflects a combination of factors.

Firstly, in September, the epidemiological situation worsened, and this has been a concern for much of the population. Secondly, opening educational institutions was postponed, which placed pressure on many families with small children, especially those with working parents. In addition, depressed young adults have been unable to attend classes. These factors are reflected in recent evidence compiled by the Caucasus Research Resource Center (CRRC). The CRRC administered a survey in May, with a sample size of 1053 individuals, in which more than two-thirds of respondents disagreed or strongly disagreed with the need to wait for COVID-19 to subside, preferring instead to open up the economy.

The exchange rate is a potential third factor, as, since the beginning of September, the GEL has resumed depreciation against the US dollar. This trend also continued in spite of Central Bank intervention (NBG sold 40 million USD on the 16th of September). Notably, the exchange rate in Georgia is related to Consumer Confidence and we have measured the correlation between the monthly CCI index and the USD/GEL exchange rate. It is above moderate, at -0.56, and it is even higher (-0.62) when it comes to the Expectations Index. This may reflect people’s anticipation about their future consumption: as consumption is dominated by imported goods, GEL depreciation should lead to some inflation. Moreover, for those with loans in USD, the debt service will increase. Even though there are not too many people who are caught in this situation (in 2019, the accumulated number of loan agreements in USD was 76 000), they tend to belong to an affluent part of the populace and their voices are heard: each time the national currency depreciates, it becomes a hot topic in the media.


Interestingly, the sentiment gap between Tbilisi and the rest of Georgia is still rather narrow, unlike between late 2016 and early 2020 (see Chart 2). During which time, the gap was driven by a higher level of optimism of Tbilisians. It is possible, this time, that the impact of COVID-19 is more severely felt in Tbilisi than in the countryside, allowing the rest of Georgia to catch up with the capital.


The number of individuals behind those agreements will be lower. For the relevant data, see: NBG Analytics