The National Bank of Georgia (NBG) has published a monetary policy report which reviews the factors of high inflation in the country. The NBG notes that in the current inflation of 12.3%, about 8 percentage points accounts for the external factors.
The National Bank considers that inflation will remain at a high level until the end of the year, and from the second half of 2022 it will be closer to the 3% target. The NBG prediction is based on the same expectation, according to which the refinancing rate should be gradually reduced to 7.75% -8% next year.
“Inflation is expected to remain high at the rest of 2021. Given that the contribution of temporary factors to inflation will continue to be decisive and, at the same time, monetary policy is tightened, the Committee decided to maintain the current level of interest rates, although the risk of rising inflation expectations in the face of strong supply shocks remains relevant. However, inflationary risks persist and their realization may lead to further tightening of monetary policy. At the same time, the increased contribution of foreign currency loans to the increased lending, against the background of rising GEL resources, is particularly noteworthy. Against the background of the expected single exogenous factors, inflation will begin to decline in 2022 and will gradually approach its medium-term target. This process is facilitated by the expectation of maintaining a tighter monetary policy for some time," - said Koba Ggvenetadze.
