Page 16 - GEORptSep19

4.2 Inflation
4.2.1 CPI dynamics
Georgia’s inflation accelerates to 4.6% y/y in July on higher food and tobacco prices
Georgia’s consumer price index edged down by 0.02% m/m in July, while the country’s annual inflation rate accelerated to 4.6% from 4.3% in the month before as food prices keep rising fast, Georgian National Statistics Office Geostat said on August 2.
Consumer prices likely came under pressure because the local currency weakened during July prompting a central bank intervention to keep the lari above the psychologically important threshold of GEL 3 to the dollar. The short-term inflation data series, that might detail whether price fundamentals have changed significantly since Russia placed a limited ban on the import of Georgian goods and discouraged tourism in Georgia in the wake of anti-Russian protests that started in June, is not yet available. The lari underwent a certain weakening during the first half of the year, with a positive impact on the trade balance.
Georgia’s central bank targets 3% annual inflation and has maintained a hawkish 6.5% refinancing rate, having cut it to 6.75% in January and 6.5% in March.
According to Geostat, average prices not including tobacco rose by 0.4% m/m and 3.9% y/y as of July. Core inflation was 3.4% in the month, while core inflation corrected for the price of tobacco amounted to 1.9%.
The prices of food and non-alcoholic beverages, mostly responsible for the rise in consumer prices recently, increased by only 0.2% in July compared to June, but remained 7.9% up y/y and contributed 2.33pp to the overall 4.6% annual inflation rate.
Tobacco excise taxes, which were increased in January, were another relevant driver for consumer prices in Georgia. Not only did the ad valorem excise increase from 10% to 30% as of January, all tobacco products are now charged the excise previously only charged on filtered cigarettes (non-filtered
16 GEORGIA Country Report September 2019 www.intellinews.com