In May, approximately $400 million worth of deposits were converted from Georgian Lari (GEL) to US dollars in Georgian banks, according to a weekly update from TBC Capital's chief economist.

TBC Capital noted that while net foreign exchange inflows are positive for the Lari, significant exchange rate fluctuations are being driven by market sentiment.

"According to our assessment, foreign currency inflows are generally neutral or even positive for the Lari's exchange rate, especially when considering separate conversions. In May, based on daily monetary aggregate data from the SEB, it appears that approximately $400 million in deposits were transferred from GEL to foreign currencies. This resulted in foreign currency deposits reaching one of the highest growth levels in recent years, while the growth of GEL deposits declined. Overall, the dynamics mirror previous months. Although the dynamics of May's credit activity by currency composition are not yet available, similar periods have typically seen a relatively greater increase in GEL loans. Given the size of the Georgian economy and its foreign exchange market, there is considerable pressure," the report stated.