The FINANCIAL — As predicted, Kh-index bottomed out in June, and started on the upward swing of its 6-month seasonal cycle.
The Tbilisi prices of all Khachapuri ingredients that are subject to seasonal fluctuations rose in July: the price of butter added 2%, milk and cheese prices gained 7-8%. As a result, the Tbilisi price of cooking one standard Imeretian Khachapuri increased by 4.4%, compared with June.
The July price of Khachapuri is still significantly lower (by 17.5%) than the absolute maximum recorded in January 2011. According to our July survey, the price of Khachapuri was in the 2.4-3.2 GEL range; the average price was 2.84 GEL.
On the negative side, the year-on-year increase in Kh-Index was 19.4%: in July 2010 one could cook a Khachapuri for just 2.37 GEL! This is a quite a bit higher than the 10% estimate of the year-on-year CPI inflation for the same period.
Economic lesson of the week: Seasonal fluctuations in tourism, the case of Bakuriani.
The fluctuations in the price of Khachapuri have a clear seasonal pattern that is quite characteristic of agricultural production. Another important sector affected by very strong seasonal fluctuations is tourism. To take the example of Bakuriani, the bulk of tourists arrive during the ski season (typically, December till March) with another, much smaller, wave of tourism occurring in the hot summer months (mainly July and August). This seasonal structure of the demand for tourism is a key binding constraint on the development of tourism infrastructure in Bakuriani, straining its ability to offer quality services during the high season and compete with other touristic destinations.
Any government policy to address the seasonality bottleneck should include two elements: infrastructure development and coordination. The second element is particularly important given that promoting Bakuriani’s attraction as a prime touristic destination would require a coordinated action of many interdependent actors: local government, hotels, small and medium businesses (cafes, restaurants, spa facilities, sports and recreation equipment rental, shops), tour agencies, transportation companies, etc. A key aspect of such a coordination effort should be to develop touristic services (and related infrastructure) that would attract tourists in the low season so as to make better use of existing infrastructure and staff, helping businesses improve their productivity and benefit from a more stable and motivated workforce.
The ISET Khachapuri Index
The International School of Economics at Tbilisi State University (ISET , www.iset.ge) has designed a simple and robust way of tracking inflation and the differences in the cost of living across Georgia’s major cities. Unlike traditional “consumer baskets” used for monitoring price inflation, our "basket" includes only those ingredients that are needed to cook one Imeretian khachapuri (cheese, butter, flour, yeast, eggs, and milk) and energy inputs (gas and electricity). We conduct a monthly survey of the major markets in Tbilisi, Kutaisi, Batumi and Telavi to measure the differences in the cost of living across Georgia and to track the monthly fluctuations in the prices of all relevant ingredients.
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