Page 78 - bneMag Dec22

78 I Eurasia bne December 2022
Georgia monetary policy rate vs CPI inflation y/y
Asia, as inflation is almost under control, albeit still at high levels. But Gvenetadze says that thanks to the uncertainty he is ready for anything and will act if there are more shocks.
“Emerging markets are helping to fight inflation and bring it down,” Gvenetadze told bne IntelliNews. “Our inflation has peaked at 13.9% and is now falling because of the flow of immigrants, capital transfers and remittances. That means the currency has appreciated – the lari is now one of the strongest currencies in the world.”
Gvenetadze said that they are watching the UN Food and Agriculture Organiza- tion (FAO) index closely, which also shows that food prices are starting to fall, which is more good news.
The NBG has tightened enough to make real interest rates real, “but there are remains the possibility of upside sur- prises,” Gvenetadze told bne IntelliNews. “If there are surprises then we are ready for further policy increases and will prolong that as long as is necessary.”
Armenia
“Armenia has long had low inflation thanks to is strong institutions and transparent policies, but the creditability of the central bank is earned during its reaction to shocks,” Nersoso Yeritsyan, the deputy governor of the Central Bank of Armenia, said at the same roundtable.
Inflation was low until the coronacrisis began and took off on the third quarter of 2020, rising to a peak of 10.3% in June this
Source: NBG, GeoStat
“We see a risk that inflation will become entrenched,” Koba Gvenetadze, Governor of the National Bank of Georgia (NBG), told bne IntelliNews on the sidelines of the Uzbek Economic Forum in Samar- kand. “Inflation in Emerging Markets is higher, as the share of food in the price
cally rents have doubled in the capital as well as the stronger economic growth driven by increased demand that has not helped in fight against inflation. Georgia is a small country, so the arrival of so many migrants has made a notice- able difference to the economy.
“Migration has played a very important role. The large foreign exchange inflows to Georgia
from other countries have strengthened the currency and helped contain inflation”
basket is higher than developed coun- tries. In addition, there is a new factor in the current geopolitical uncertainty.”
The huge influx of Russian migrants that first arrived after Russia invaded Ukraine in February and a second more recent wave escaping the mobilisation have actually pushed Georgia’s inflation down. To a lesser extent the same thing has happened in Uzbekistan and many Rus- sians have opened Uzbek bank accounts, which they can use both at home and in Europe despite the SWIFT sanctions.
“Migration has played a very important role. The large foreign exchange inflows to Georgia from other countries [have] strengthened the currency and helped contain inflation,” Gvenetadze said.
The strengthening of the currency
has helped but it is also offset by the migrants driving up demand by 1.5% of GDP, Gvenetadze says, and more specifi-
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“We need to address all these pres- sures, otherwise inflation will become entrenched,” Gvenetadze concluded. “We need to find a golden mean between all these factors.”
Georgia is in the best position of all the countries of the Caucasus and Central
Armenia monetary policy rate vs CPI inflation y/y
Source: Central bank of Armenia