Page 15 - GEORptMar19

4.2.1 CPI dynamics
Headline inflation eases in Georgia
Consumer prices in Georgia increased by 1.5% y/y in December, easing from the 2.7% y/y rise seen in September, the national statistics office reported. Headline inflation has thus dropped to its lowest level in nearly two years with prices hovering at a steady level throughout this year.
The monetary board of the National Bank of Georgia on January 30 cut its refinancing rate by 25bp to a still restrictive rate of 6.75%. Annual inflation in Georgia decreased at the beginning of 2018 and, in line with previous forecasts, remains within the target rate of 3%, the central bank said. According to current forecasting, inflation both this year and in the medium term will fluctuate around the target rate.
According to central bank estimates, there is still the necessity of policy normalisation—that is, gradual policy easing. However the speed of normalisation will depend on how fast the output gap closes on the one hand and how strongly increased regional macroeconomic risks are transmitted to the Georgian economy, on the other.
Despite the slight disinflation seen as of October, the prices of individual goods have changed significantly both directions.
4.2.2 PPI dynamic
Georgia’s PPI for industrial products up 3.8% y/y in Dec consolidate disinflationary trend
Georgia’s Producer Price Index (PPI) for industrial products increased by 3.8% y/y in December, decelerating from 6.6% y/y in August, according to the national statistics office.
The rise in food, metal and energy prices contributed the most to the prices’ dynamics. The industrial price figures consolidate the disinflationary trend (with the consumer price inflation easing below the 3% y/y target level), justifying central bank’s decision of lowering the monetary policy interest rate to 6.75%. Nonetheless, higher energy and food prices might pass through to consumer prices posing inflationary pressures. The import prices rose more than export prices on a longer-term upward trend.
15 GEORGIA Country Report March 2019 www.intellinews.com