Turnava Says Inflation to Fall to 3.5% in 2027 if Middle East Conflict Eases
By Messenger Staff
Tuesday, November 10, 2026
Inflation in Georgia will average 5.4% this year and slow to 3.5% on average in 2027, provided the conflict in the Middle East subsides in the coming months, National Bank President Natia Turnava told Parliament's Finance and Budget Committee.
Turnava was presenting the draft main directions of monetary and foreign exchange policy for 2027-2029.
The forecast is the bank's updated baseline scenario, all other things being equal, and it depends largely on global developments, energy prices in particular. Under it, inflation begins to decline next year and approaches the 3% target in the second half of 2027.
The projection assumes the situation in the Middle East stabilizes and the resulting price pressures gradually fade. "This is a factor beyond our control, but our baseline forecast is based on this assumption," Turnava said. "Uncertainty in this regard remains high, and risks remain acute."
The National Bank tightened its policy rate by 0.25 percentage points in May 2026, a preventive move against external shocks and the risk of second-round effects. The rate stands at 8.25% and has not changed since.
The aim, Turnava said, is for inflation to return to target quickly once the shocks pass. The bank is "equally prepared to tighten policy further" if external shocks intensify and so-called second-round effects appear. If external factors ease in line with the baseline, it is ready to start loosening gradually. For now, it is keeping the rate relatively tight and watching external developments closely.
The National Bank has no plans in the coming years for a widespread issuance of the digital Lari, Turnava said, including a so-called retail digital Lari, meaning a digital currency held directly by the public.
Asked whether it would replace cash, she said: "Under no circumstances will the digital equivalent replace or be able to replace the cash Lari." She attributed the guarantee to the Organic Law, which protects banknotes as the physical form of cash.
Turnava said the bank's main objective is not to fall behind leading countries technologically, pointing to several states that are testing similar technologies. With the legislature's support, the bank has obtained the right to run so-called pilot programmes in limited areas. These, she said, will show the potential benefits of a digital Lari, the challenges it may bring and how to address them. "At this stage, this initiative is intended solely for limited pilot testing," she said.
Digital currency technology is already widely accepted in Georgia and globally because it is "faster, often cheaper," and represents the future, Turnava said. She added that central banks in leading economies are testing these technologies to maintain their position and protect the benefits of official currencies before deciding how broadly to deploy them.
Turnava also highlighted a drop in interest rates, noting that rates on new Lari mortgages have fallen by about 3 percentage points over the past 18 months. She added that with periodic bank promotions, Lari mortgages can now be obtained for as low as 9%.
Turnava linked the trend to a reduction in certain risks, partly the result of larger reserves, and called it "a positive development." Business lending rates are also trending down, though less sharply, while consumer loans still carry higher rates. She stated that the first factor that will help bring rates down further is stronger competition.
