Page 21 - Caucasus Outlook 2025

4.0 Inflation & Monetary Policy 4.1 Inflation & Monetary Policy – Georgia
Consumer price inflation, which fell to 2.5% in 2023, slowed further in 2024, supported by effective central bank policies and increased competition across various sectors. Georgia's annual inflation rate remained low at 1.3% in November 2024, according to data released by the National Statistics Office (Geostat) on December 3. On a monthly basis, consumer prices rose by 0.7%.
The annual inflation rate was influenced by price changes in several categories: miscellaneous goods and services (+6.6%), alcoholic beverages and tobacco (+5.1%), food and non-alcoholic beverages (+3.1%), housing, water, electricity, gas and other fuels (-3.7%) and communication (-12.9%).
The European Commission forecasts an average inflation rate of just over 1% for 2024. Inflation is expected to rise temporarily in 2025 due to strong domestic demand before stabilising at the central bank's target level of 3% in 2026.
As of early December 2024, National Bank of Georgia (NBG) monetary policy rate was 8%.
In response to the declining inflation rate, the NBG has been gradually lowering the monetary policy rate. Over the year, it reduced the rate by 3 percentage points (pp), bringing it to 8% as of November 2024. The central bank’s latest macroeconomic forecast predicts inflation will average around 1.2% in 2024, with expectations of stabilising around the target level in the medium term.
Natia Turnava, acting governor of the NBG, told the parliament in December that inflation has been below the target rate for the past 20 months. She said that the optimal inflation target, set at 3%, is essential for Georgia’s economic development.
Fitch Ratings projected in December that inflation would average 2.1% in 2025 and rise slightly to 2.3% in 2026. The agency noted that from January to November 2024, inflation averaged just 1%, falling below the 3% target, largely due to subdued domestic price pressures. However, Fitch anticipates inflation will climb over the next two years, with potential risks stemming from a weakening Georgian lari.
4.2 Inflation & Monetary Policy – Armenia
In 2024, Armenia's inflation rate showed a significant decline, with
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