When the economy shrinks, the demand shrinks as well, which means that less is sold and subsequently, prices fall. "This is the main reason why the CPI decreased" - Akaki Tsomaia, an economist commented on the recent inflation numbers for Georgia, released by the Geostat today.
The economist's outlook for January is that prices will keep decreasing tendency unless Lari is significantly depreciated. "Then Lari depreciation factor together with a possible decrease in supply may drive the economy down and prices up; however, then demand shrinks again" - Tsomaia noted.
According to the economist, if the decrease in prices is kept, the NBG might consider softening the monetary policy - the rate today amounts to 8%.
Tsomaia said this will be mainly dependent on growth in credit. "This is up to the private sector" - he concluded.
