Page 36 - GEORptSep19

stability to the Group's governance. It was noted that the Board's structure would be consistent with the requirements of the UK Corporate Governance Code, including with respect to the independence of its chairman and there being a majority of independent non-executive members of the Board.
8.2 Central Bank policy rate
Georgia’s central bank keeps policy rate at 6.5%
Georgia’s central bank sees 5% growth, inflation above target this year
Georgia’s central bank on July 24 kept its refinancing rate unchanged at a hawkish 6.5%.
The national lender is targeting 3% annual inflation. Cuts to 6.75% in January and 6.5% in March were made by the rate-setters. Annual consumer price inflation in June stood at 4.3%, up from 2.2% in June 2018, but down from 4.7% in the preceding month.
The central bank’s next monetary policy meeting is scheduled for September 4.
In May, the central bank stuck to its forecast for robust real GDP growth of 5% for Georgia in 2019. Inflation would, however, remain above the 3% target throughout the year and ease no sooner than 2020, it added. The central bank consequently envisages moderate 50bp rate cuts over the next two years, taking the benchmark rate to 6.0% in Q1, 2021.
Consumer prices have risen by 4.1% over the past 12 months in Georgia, with the country experiencing its highest annual inflation rate since January 2018, statistics office Geostat reported. Georgia’s central bank held its benchmark interest rate at 6.50% on May 1, citing forecasts that suggested annual inflation will stay close to its 3% target this year. The central bank plans to ease interest rates towards 5%-6% over the next two years, central bank governor Koba Gvenetadze told Reuters in January.
“The current macroeconomic forecast also envisages a downward trend of the monetary policy rate in the medium term,” the monetary policy report confirmed on May 8.
According to the forecast, downward pressure on inflation coming from still weak aggregate demand will be balanced this year by the effect of excise taxes on tobacco and by imported inflation along with higher intermediate costs of servicing debt due to dollarisation. In the medium term, alongside with the elimination of one-off factors, aggregate demand is expected to increase to the potential level of output, ensuring the inflation rate is maintained close to the target.
As regards the growth outlook, the central bank expects a temporary slowdown in the second part of the year.
“Despite the risks stemming from a softening of economic growth in the second half of the last year, the baseline scenario expects that the slowdown will only be temporary. This view is based on the assumption that the moderate growth of credit activity will continue, and that fiscal stimulus will be of the planned scale,” the central bank said.
According to the current forecast, net exports, consumption and investments will all positively contribute to real GDP growth – again, supported by capital spending of the government and moderate growth in loans, according to the
36 GEORGIA Country Report September 2019 www.intellinews.com