Page 21 - GEORptSep21

Georgia’s headline inflation soars to 9.9% y/y in June
government in the winter of 2020-2021 and the increase in the price of bakery products consecutive to rising wheat prices expected on the regional market.
Kavtaradze added that “inflation will be affected by rising prices for bread products, although the pressure of other categories may be eased and balanced. But this does not mean that there will be a significant downward trend in inflation in the coming months.”
Russia's new quota and export tax has added to concerns about the Black Sea wheat price, while firm freight prices are also complicating forward deals.
“The new crop Black Sea wheat started from high [price] levels, and there are not many forwards in the books... much less compared with last year,” a broker told Fastmarkets.com.
The Russian government said at the start of February it would impose a floating tax for wheat exports from June 2. In Georgia, about 80,000-100,000 tonnes of wheat are harvested every year. That covers less than 10% of the overall consumption countrywide.
Last year, 87.3% of the wheat imported into Georgia (430,236 tonnes) came from Russia. Georgia plans to partially replace Russian wheat with Kazakh grains with the Russian wheat export tax doubling per tonne, according to executive director of the Georgian Flour Producers Association Levan Silagava, speaking in March.
Georgia’s consumer price inflation came in at 9.9% year on year in June, a major 2.2pp rise from 7.7% y/y in the previous month, according to Geostat.
Core inflation (non-food, non-energy) was down to 5.9% y/y from 6.5% in May and 6.9% in March-April, though.
Core inflation excluding tobacco was 5.8% in June, also down from 6.9% in April.
Notably, the national currency has strengthened significantly in June versus the US dollar, to 3.16 GEL to USD from 3.38 in May and 3.44 in April, easing the pressures exerted by expected inflation.
The monetary board of the National Bank of Georgia (NBG) on June 23 left its refinancing rate unchanged at 9.5%, despite the “temporary” inflation that reached 7.7% in May – more than twice the 3% inflation target.
The upward revision of Georgia's regulated natural gas prices in July and the base effects of the subsidised utility prices in December-February will further exert upward inflationary pressures, the NBG conceded. Still, NBG expects average inflation this year to be 7% and hopes that headline inflation will return towards the target inflation rate by the end of 2022.
By categories, annual inflation was mainly driven in June by price changes in food and non-alcoholic beverages (+8.8% y/y, +2.78pp), transport (+22.0% y/y, +2.54pp), housing, water, electricity, gas and other fuels (+10.5% y/y, +1.59pp), health (+11.6% y/y, +0.90pp), furnishings, household equipment and maintenance (+10.6% y/y, +0.57pp) and alcoholic beverages and tobacco (+7.4% y/y, +0.47pp) categories.
On a monthly basis, there was 0.7% inflation in June 2021, reflecting a price increase in the housing, water, electricity, gas and other fuels (+2.7% y/y,
21 GEORGIA Country Report September 2021 www.intellinews.com