The FINANCIAL — Judging by Kh-Index, in June Tbilisi retained its status as the most expensive city in Georgia, followed by Batumi and Kutaisi.
However, the gap between Tbilisi and other cities has become less pronounced. While Kh-Index fell in Tbilisi, it rose slightly in all other cities. As a result, in June the gap between Tbilisi and Telavi (the cheapest city in our survey) was only 2% compared with 11% in May: one Imeretian Khachapuri cost 2.72 GEL in Tbilisi and 2.67 GEL in Telavi.
Taking into account the geographic variation in the price of Khachapuri and income per family (using official 2010 GeoStat data), we calculated the number of Khachapuri portions a family could cook in Adjara, Imereti, Kakheti and Tbilisi. While the price of Khachapuri is only marginally higher in Tbilisi, the income gap between the capital and, say, Kakheti is very significant: 700 GEL in Tbilisi vs. 435 GEL in Kakheti. In June, an average Tbilisi family could cook about 257 portions of Khachapuri compared with only 163 portions in Kakheti.
Economics lesson of the week: What can explain the opposite movement of Kh-Index in Tbilisi and other cities in our sample?
Last week we discussed the impact of seasonal fluctuations in the supply of cheese on its price in Tbilisi. We argued that with the opening of mountain passes in May and June, large stocks of cheese from the remote Georgian regions reach the Tbilisi market, causing prices to go down. What we would like to emphasize this week is that demand is also subject to seasonal fluctuations. In the Georgian case, beginning in June, many Tbilisi families move to their villages. As a result, demand for food (including cheese) goes down, applying additional downward pressure on food prices in Tbilisi. The opposite is happening in the “receiving” provincial locations where demand for food temporarily goes up, reversing the trend in the movement of prices. The seasonal shift in demand is particularly strong in Adjara, a popular destination for Georgian and international tourists. According to the government’s optimistic forecast, Adjara will be hosting more than 1.5 million visitors during this summer. Thus, we expect the price of Adjarian khachapuri to soar in the coming months.
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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