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According to the NBG forecast, other things being equal, the inflation rate will start to decline from the beginning of the year and approach the 3% target by the end of the year. "This will be ensured by the monetary policy which will remain tight until the medium term inflation expectations decline to the three percent target," the monetary authority stated.
Georgian inflation gradually accelerated from the 1.5% y/y posted in December 2018, driven by higher excise duties on tobacco and rising food prices on the one hand and local currency weakening magnified by expectations for further exchange rate slippage on the other.
The hawkish monetary policy pursued since last autumn with the aim of addressing the effects of the negative sentiment versus the local currency has so far not surfaced in the GDP growth figures—but lagged effects are still to come. Nonetheless, growth remains robust in absolute terms and no major slowdown is expected unless external factors deteriorate abruptly.
The latest forecast from a major international financial institution is from the World Bank. In its Global Economic Prospects report, it said Georgia’s growth this year is expected at 4.3%. Six months ago it was anticipating 4.8%.
37 GEORGIA Country Report February 2020 www.intellinews.com
