Page 44 - GEORptFeb21

Committee does not rule out the need for an increase in the interest rate in the future,” a press release read.
The NBG pointed to exchange rate issues—due to the still high dollarisation seen in the economy, room for easing monetary policy is limited.
In a press conference after the monetary policy committee met, NBG president Koba Gvenetadze confirmed that the central bank would carry out foreign exchange interventions before the end of this year and in the first half of 2021 if necessary.
Since the beginning of 2020, the central bank has provided $886mn to the market. The regulator would continue to intervene depending on the market situation, Gvenetadze said.
He reiterated that the purpose of the interventions are not carried out to maintain the national exchange rate at a specific rate.
"The course must go in the direction determined by the economy. The purpose of the interventions is to ensure the supply of foreign currency to the market, while the market has suffered a loss; just to name tourism as an example, where there is a huge loss this year and [the interventions] are done to prevent market misconduct," said Gvenetadze.
According to the current forecasting, the annual inflation rate will stay close to the central bank target level in the first half of 2021. The inflation dynamics are mainly determined by weak aggregate demand and this impact is expected to persist next year as well.
However, the NBG found both demand and supply side inflationary drivers: the effect on aggregate demand coming from increased pandemic-related social and economic support fiscal measures of 2020-2021 is noteworthy, the monetary board argued.
The monetary policy committee also took into account supply-side factors, such as the increase in production costs due to additional restrictions in the wake of the pandemic. Furthermore, it took note of uncertainties surrounding the prolonged pandemic and related global restrictions.
44​ GEORGIA Country Report​ February 2021 ​ ​www.intellinews.com