Page 14 - GEORptApr20

4.2​ Inflation 4.2.1​CPI dynamics
Inflation in Georgia steady at 6.4% in February
Annual inflation in Georgia in February stood at 6.4%, up 2.3% y/y but in line with what was seen in January. ​However, the worst is still to come for the country’s economic fundamentals. The GEL has plunged by double digits in a matter of weeks and similar episodes last year indicate that investor and public sentiment can hardly be stabilised.
The country’s inflation level peaked at 7% y/y in December. It is expected to drop to 3% by the end of the year as one-off effects seen last year, largely from tobacco excise duty, phase out.
More telling price stabilisation will be needed, however, to prompt the central bank to cut its refinancing rate from the current 9%.
In February, the annual inflation rate was driven by price changes in food and non-alcoholic beverages (up 12.7% y/y) and restaurants and hotels (up 8.7% y/y).
According to a National Bank of Georgia forecast, other things being equal, the inflation rate will approach the 3% target by the end of this year. "This will be ensured by monetary policy which will remain tight until medium-term inflation expectations decline to the three percent target," the monetary authority stated at its monetary board meeting held at the end of January.
4.2.2​PPI dynamic
Georgia’s PPI for industrial products up 6.7% y/y in February
Georgia’s Producer Price Index (PPI) for industrial products increased by 6.7% y/y in February this year, after a 7.1% and 7.8% y/y rise in January and December, respectively, according to the national statistics office.
It was the lowest producer inflation since June last year as cost decreased for manufacturing, electricity, gas, steam and air conditioning supply and mining. On a monthly basis, producer prices decreased by 0.3% in February.
14​ GEORGIA Country Report ​April 2020 ​ ​www.intellinews.com