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share, manufacturing with 10.3%, construction 5.7%, transportation and storage 5.3%, electricity, gas, steam and air conditioning supply 3.3% and other sectors with a 8.9% share.
4.2 Inflation 4.2.1 CPI dynamics
Easing inflation supports hopes for rate cuts by year-end in Georgia
TBC Bank sweetens forecast for Georgia’s inflation growth
Georgia’s consumer prices increased at a moderate monthly rate (+0.1% m/m) for the third month in a row in August and the annual inflation rate eased to 10.9% y/y in the month from the peak level of 13.9% y/y in May, according to data from the statistics office Geostat.
Prices of food and transport (fuels included) rose by nearly 16% y/y while the prices in the HoReCa industry also increased by nearly 15% y/y. In contrast, the prices of clothing, communications as well as health and education systems increased by a couple of percentage points at most over the past year.
The core inflation also edged down, to 7.0% y/y in August from 7.1% y/y in July.
This supports expectations for possible rate cuts by the end of the year, which would bring the refinancing rate into the range of 10%.
Since March 30, the refinancing rate in Georgia is 11%.
TBC bank cut in July its forecast for Georgia’s inflation at the end of the year to 7.4% y/y from 8.5% previously.
Coupled with strong net inflows, the revised inflation outlook “further confirms the GEL rate cuts outlook, foreseeing the policy rate by the end of the year declining from its recent 11% to around 10%,” according to TBC Capital, the investment banking arm of TBC Group.
The GEL assessment was maintained unchanged from a week ago. TBC thus remained “slightly, but still bullish,” on the exchange rate. In recent days the USD has strengthened against regional currencies.
22 GEORGIA Country Report October 2022 www.intellinews.com