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National Bank of Georgia Keeps its Monetary Policy Rate Unchanged at 10.5%

By Khatia Bzhalava
Thursday, February 3, 2022
The Monetary Policy Committee of the National Bank of Georgia has decided to keep the refinancing rate unchanged at 10.5%. The committee maintained a tight monetary policy to prevent long-term inflation expectations against the background of strong supply shocks and the current high rate of inflation in Georgia. The GDP notes that they will stick to the same policy until the risks of rising inflation expectations are sufficiently mitigated.

According to the statement, the extraordinary situation caused by the pandemic has resulted in a high inflation environment, which also affected Georgia. The NBG notes that in December, the annual inflation rate rose to 13.9%, the main reason of which was the base effect of the 2020 subsidy on utility bills.

“Overall though, since the first half of 2021, high inflation has been driven by globally rising prices for food, oil, and shipping. Consequently, high inflation is largely due to imported goods, that reflect increased US dollar prices in international markets,” the NBG notes, adding that the recent strengthening of the nominal effective GEL exchange rate has somewhat eased the pressure from international markets.

The Central Bank further said that the high inflation rate would continue to persist in January and February, before starting to decline gradually from spring and would eventually approach the target by the end of the year.

According to the preliminary data, real GDP amounted to 10.6% in 2021 and as for 2022, the economic growth is projected at 5%. The central bank also highlighted positive trends in terms of foreign demand, noting that in December 2021 exports increased by about 29% annually, while the increase compared to the corresponding period of 2019 is 6%.