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What Сauses High Inflation? – Gvenetadze’s Answer

60b8a371de445
Natia Taktakishvili
03.06.21 13:30
609
The President of the National Bank of Georgia Koba Gvenetadze answered the questions of the parliament members at the session of the Finance and Budget Committee of the Parliament of Georgia. Members of the parliamentary majority asked questions to the head of the regulatory body on maintaining the inflation target and the balance of economic growth.

Parliament Member Davit Songhulashvili spoke about the high inflation rate for the last 4 years and asked the NBG President how much it was analyzed during the crisis and if indicators were revised.

According to Songulashvili, there are always reasons for high inflation, sometimes subjective, sometimes objective, but isn’t it the fault of predications made by the NBG, as the business arranges its plans relaying on the NBG’s statements.

“Current inflation exceeded 7% this year. One of the big challenges for the government is to recover the economy quickly, on the other hand the appropriate response to the inflation is to increase refinancing rate, how are you going to balance that? What do you think about this issue is very important?" Davit Songhulashvili asked.

Koba Gvenetadze agreed with the MP that inflation is a problem and noted that inflation is not high in the medium term.

"Inflation in the last four years was as follows: 2017 - 6.7%; 2018 - 1.5%; 2019 - 7%, or if we take the average period, it will be 4.2%, which is not very different from 3.2%. Unfortunately, there are exogenous events, which act. It is unfortunate, but in the short term it is impossible to do anything," - said Gvenetadze.

He noted that due to a number of factors in the countries of the region and the world in general, inflation is high.

"Why should we take these factors into account, because for long-term and stable growth we need to know that low inflation is important. If high inflation is maintained for a long time, it will not be good, even for investors. Georgia found itself in a worse position compared to other countries after 2019, when the factor of expectations was also affected and there should be no question about that. In our case, inflation is more continuous than in the other case, and at this time more aggressive steps need to be taken to link inflation to the target in the future. It needs to be discussed, but in the short term it cannot be resolved during a crisis. The gold balance is very important. We need to take some measures, because if the economic growth is high, inflation will reduce this growth, so we should reduce the inflation because the growth will be higher in the future, "said Koba Gvenetadze.