National Bank Increases Refinancing Rate to 11%
By Natalia Kochiashvili
Thursday, March 31, 2022
The Monetary Policy Committee of the National Bank of Georgia (NBG) decided on March 30, 2022 to increase the refinancing rate. The monetary policy rate will be 11%.
The NBG says recent developments, particularly Russia's invasion of Ukraine and hostilities, have posed new challenges to the post-pandemic recovery world economy.
The bank expects the credit activity to be moderately high during the year, despite tightening monetary policy and recent macroprudential measures.
As for aggregate demand, according to preliminary data, in 2021 GDP will grow by 10.4%. According to previous forecasts, growth of 5% was expected in 2022, however, from today’s forecast, the growth rate will be within 3-4%.
Amid the expected slowdown in economic growth, inflationary pressures from aggregate demand will be small and supply factors will remain dominant throughout the year. It should also be noted that in the light of current events, the scale of forecast uncertainty has increased significantly.
“Monetary policy is in a tightened phase as a result of the gradual increase in the monetary policy rate over the past year due to rising risks of inflation expectations.” statement read, clarifying that policy will continue to tighten until the risks to rising inflation expectations are sufficiently mitigated.
The bank said that in the face of even more heightened inflationary risks and long-term inflation targets, the Monetary Policy Committee considered it appropriate to raise interest rates by 0.5% points.
The next meeting of the Monetary Policy Committee will be held on May 11, 2022.
