Page 6 - GEORptMay21

The NBG, citing a rather bleak inflationary outlook generated by overlapping domestic and external factors, on April 28 hiked its refinancing rate by another 1pp, following the 0.5pp added in March, resulting in a hawkish 9.5% rate that is the highest seen for several years. NBG, in explaining its monetary policy tightening, is citing risks of imported inflation and high dollarisation that facilitates the strong pass-through of exchange rate variations to consumer prices.
The foreign direct investment (FDI) flow to Georgia amounted to $616.9mn in 2020, down 52.9% from 2019, according to the preliminary data announced by statistics office Geostat. The figure was the lowest recorded in 15 years.
Georgia's exports decreased by 6.8% y/y in January-February to $494.7mn. However, domestic exports (which exclude re-exported goods) increased by 7.9% y/y to $369.0mn. They amounted to 74.6% of total exports, driven by exports of metal ores to China. Direct exports have now been on the rise for four years, moving up 50% since 2016.
On the political front, the ruling party Georgian Dream on April 16 signed up to a compromise prepared by European Council President Charles Michel’s personal envoy Christian Danielsson. The agreement is entitled “A way ahead for Georgia.”
A quick resumption of the global tourism industry and the normalisation of relations between the ruling and opposition parties are the main elements that would in coming years address the damage inflicted on Georgia’s economy.
2.0 Politics
2.1 Georgia’s big opposition parties eye one week deadline in settling of political crisis with EU brokered deal
Georgia’s ruling party Georgian Dream and small Georgian opposition parties—so not including main opposition party United National Movement (UNM) and European Georgia—at an official ceremony signed an EU-brokered agreement likely to be embraced by the radical opposition parties as well if key promises are met by a one-week deadline.
The UNM and EG have made it clear that the freeing from detention of UNM leader Nika Melia must go ahead under an amnesty to be passed by parliament, while opposition figure Giorgi Rurua should be set free under a presidential pardoning bill. Also, the opposition parties require that they are given a significant number of posts in parliament.
The new proposal for a settlement of the country’s six-month-old political crisis devised by European Council President Charles Michel, which was released on April 18, covers electoral and judicial reforms, offers a pardon for all
6 GEORGIA Country Report May 2021 www.intellinews.com