The FINANCIAL -- Being a researcher is not only my job, it is my way of life. Every time I get the chance, I start conversations with random people and ask them tons of questions. During a recent taxi ride, after I asked the driver how his business was going, he told me that the demand for taxis had fallen significantly in January. He also added that January is typically a harsh period, and there’s not much money left for comfortable trips after the traditional “Supras”, as well as the recently introduced “Secret Santa” gift exchanges.
After the conversation, I wondered whether this phenomenon might be reflected in our CCI index. At first glance, I found that his story seemed to be supported by the numbers. Looking carefully at figure 1, almost every January seems to be characterized by a drop in consumer confidence. Fortunately, this year the drop was not significant, at just 1.1 index points. While the reduction in the expectations index (by 5.3 points) – measuring the expectations for the coming 12 months – outweighed the growth of the present situation index (by 3.1 points).
However, it is not clear whether January’s overconsumption should be blamed for this recurrent phenomenon. When looking at the monthly change in index points (January compared to December) by survey questions and groups, it is clear that people are more concerned with the general situation in the country rather than their own condition. It is notable that expectations related to unemployment, inflation and the general economy are considerably more negative in January than in December.
Another topic we would like to emphasize is a very interesting phenomenon which has been observed
ever since ISET Policy Institute started calculating the index.
Figure 2 and figure 3 reveal that people from the regions are consistently more optimistic about the future (relative to the present) compared to their peers in Tbilisi. However, their assessments of the present and expectations for the future tend to coincide with those in Tbilisi. Although, when it comes to the regions there is a large gap between these two, with expectations about the future being systematically higher than the perception of the current situation.
Similar gaps can also be observed between the highly educated and the rest of the population, as well as between young and old individuals. It may sound somewhat surprising, but the old and less educated, despite significantly lower scores in the assessment of their current condition, report future expectations in line with the young and highly educated. When it comes to gender, no significant differences emerge.
While the reasons behind such phenomena require further research, some behavioral – and policy – implications of such “gaps” might be easy to discern. For example, those people whose expectations for the future are much more optimistic than their perceptions of the present might be more inclined to take on further debt. If this is the case, the introduction of new regulations on responsible lending in the financial system - in force since January 2019 – should be regarded as a step in the right direction.