Page 20 - GEORptSep21

4.0 Real Economy 4.1 Industrial production
Industrial production jumps 13.6% y/y in 1Q21
Georgia’s industrial production surges 13.6% in the first quarter of 2021, up from a rise of 5.8% in the previous quarter, according to the National Statistics Office of Georgia. Production expanded at a faster pace for almost all sectors such as manufacturing, mining and utilities.
4.2 Inflation 4.2.1 CPI dynamics
Galt & Taggart sees double digit inflation in Georgia by year end
Assessing Georgia's annual inflation outlook, Galt & Taggart has forecast that the country's average rate will be 8.3% this year, according to an analyst at the investment bank, Lasha Kavtaradze, as cited by Business Media.
This is 1pp above the forecast lately put out by the International Monetary Fund (IMF) and suggests that the central bank may have to further hike its key refinancing rate. It already stands at 9.5% following two hikes this year.
In the medium term, the IMF expects Georgia’s National Bank (NBG) to bring headline inflation down to 2.8% y/y on average in 2022 and 2.3% y/y at the end of next year (December 2022). Nevertheless, the Fund concurs that there are possible rate hikes ahead to keep prices under control, as GDP growth well above potential tends to generate inflationary pressures.
“With recovery now faster than expected, risks to inflation are tilted to the upside, and the NBG should be ready to promptly hike rates further if inflation expectations or core inflation suggest high inflation risks becoming entrenched,” the IMF recommended, following Article IV Consultations with Tbilisi.
The main drivers for a sharp rise in inflation, seen by Galt & Taggart analyst Kavtaradze as climbing to above 10% by the end of the year (the IMF’s projection is 9.4%), are base effects following subsidies paid by the
20 GEORGIA Country Report September 2021 www.intellinews.com