Page 41 - GEORptAug22

8.2 Central Bank policy rate
Georgian National Bank holds refinancing rate at 11%
The Monetary Policy Committee of the National Bank of Georgia (NBG) at its meeting on June 22 left the refinancing rate unchanged at 11%. In its decision, the NBG said that "high inflation and inflationary risks remain an urgent global challenge". The bank said sanctions imposed on Russia in response to aggression against Ukraine and delays in deliveries, as well as sharp restrictions on exports from Ukraine due to the war, have significantly increased prices for food, raw materials and energy on world markets.
“Furthermore, the increase in long-term visits from Russia, Belarus and Ukraine to the local market dramatically and instantly increased apartment rents, which had a significant impact on both aggregate (0.6 percentage points) and core inflation (1.1 percentage points),” the bank said in a statement.
According to the NBG, despite "high uncertainty", there are expectations that prices in international markets will not increase further, and the corresponding inflationary pressure will gradually decrease during the year. The bank also added that lending activity remained high during the year "as a result of the intensification of consumer loans on the one hand and loans in foreign currency on the other".
“The National Bank of Georgia constantly monitors the current economic processes and financial markets and will use all the tools at its disposal to ensure price stability,” the bank said in a statement. The next meeting of the Monetary Policy Committee will take place on August 3, 2022.
On 30 March 2022, the National Bank of Georgia (NBG) raised the refinancing rate by 0.5ppts to 11.0%. This decision was mostly driven by the rise in global commodity prices affecting Georgia via high oil prices as well as a wave of monetary policy tightening across the regional countries. The NBG’s communication remained balanced like in previous releases, citing that monetary policy will keep a tightening bias until the risks of rising inflation expectations are sufficiently mitigated.
The NBG's expects GDP growth in the range of 3-4% in 2022, revised downwards from the initial forecast of 5.0%.
Credit activity is expected to be moderately high during the year, despite tightened monetary policy and recent macroprudential measures. In a recent Q&A session, the NBG governor commented that the annual credit growth is
41 GEORGIA Country Report August 2022 www.intellinews.com