The FINANCIAL - The Price of Khachapuri For Our Neighbors 

The Price of Khachapuri For Our Neighbors 

The FINANCIAL -- In May 2016, the average cost of cooking one standard Imeretian khachapuri declined to 3.08 GEL, which is 2.7% lower compared to April 2016, but 7% higher compared to May 2015.

Come the summer season, tourism provides a major boost to the demand for Georgian products (and their prices). With the addition of international flights to Tbilisi, Kutaisi and Batumi, Georgia is currently attracting many more visitors from further away destinations, such as Iran and Israel. Still, the largest numbers of international arrivals originate in countries with which we have a land border: Russia, Turkey, Azerbaijan and Armenia.

During 2014 and 2015, Georgia and all its neighbors went through a process of currency devaluation relative to the US dollar. Yet, the extent of devaluation was sharper for the oil producing countries in the bunch. The result was a change in relative prices, with the non-oil countries becoming relatively more expensive for Russian and Azerbaijani consumers and tourists. 

We show this change in relative prices by translating ISET’s Khachapuri Index into the national currencies of our neighbor countries (Ruble, Manat, Lira and Dram), with January 2014 serving as the basis. As can be seen, the usual fluctuations of the Khachapuri Index during this period are greatly amplified by the wild movements in the exchange rate between GEL and other national currencies. 

As of May 2016, Georgia managed to improve by 10-20% its competitive advantage (not only in khachapuri!) with respect to Turkey and Armenia, but became some 30% more expensive for tourists from Russia and Azerbaijan. For now, however, higher prices failed to deter foreigners from coming to Georgia. And, judging by the skyrocketing Khachapuri Index dynamics in Batumi, most of them don’t carry sandwiches in their bags.

 

Author: The FINANCIAL


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