The Governor of the National Bank spoke about the advantages of the inflation-targeting regime at the plenary session of the Parliament. According to him, after the introduction of inflation targeting in Georgia, average inflation decreased. From November 2009 to November 2022, the average annual inflation in Georgia stood at 4.7%, which was equal to the average inflation target.
"As you know, until 2018, the target rate of inflation was higher than 3%, and if we count from 2009, its average level is 4.7%, which is significantly lower than the rate before the introduction of inflation targeting. We remind you that in 1996-2008 inflation was 10.2% on average. Under the conditions of the inflation targeting regime, the determination of the optimal target rate of inflation depends on many factors. Inflation in developing countries is higher on average than in developed countries.
This is mainly due to the higher rate of productivity growth in developing economies, with relatively higher inflation in the non-tradable sector. Accordingly, the target indicators of inflation in developed countries are defined in the range of 1-2% on average, and in developing countries in the range of 2-4%. At the current stage of the development of the Georgian economy, when the monetary policy framework has been significantly improved and the dollarization, despite still being at a high level, is significantly less compared to the year when inflation targeting was introduced, the inflation target rate has been reduced to 3% since 2018, which is currently a long-term target rate," he said.
