Economist Irakli Makalatia says Georgia’s inflation level was not yet critical enough to require a rate hike, describing the National Bank’s decision as preventive. He argues that the regulator likely anticipates stronger inflationary pressure ahead, which is why it increased the refinancing rate despite expectations it would remain at 8%.
According to Makalatia, external factors are often overstated, while domestic economic policy and monetary decisions receive less scrutiny. He recalls past periods when Turkey’s inflation was blamed for Georgian price increases, even though economic realities were more complex and did not fully support that narrative.
The economist notes that food prices account for over 40% of Georgia’s 5.9% inflation rate, contributing 2.58 percentage points, while fuel-driven transport inflation adds about 1.2 percentage points. However, he says the main driver is excess money supply: the National Bank injects more liquidity into the economy than it needs and later tries to withdraw it “from citizens’ pockets.”
The National Bank recently raised the refinancing rate by 0.25 percentage points to 8.25%, citing global risks, Middle East tensions, and rising fuel prices. Inflation reached a two-year high in April. The regulator says it is prepared to tighten policy further if needed or ease it once risks decline.
