Archil Mestvirishvili, the vice-governor of the National Bank of Georgia (NBG), declares that despite the inflation rate reduction, the monetary policy will remain strict this year.
On May 10, 2023, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to decrease the monetary policy rate (the refinancing rate) by 0.5 percent. The monetary policy rate stands at 10.50 percent.
According to the NBG, the decline in inflation is mostly driven by the reduced prices of imported products; since mid-2022, prices on international commodity markets have gradually declined, and international shipping costs have gone down to their pre-pandemic levels. These trends, alongside the appreciated exchange rate, have been gradually transmitting to the local market and reducing imported inflation.
"We expect that inflation will be significantly lower than the target during the year. Based on the current situation, according to our forecast, inflation will be around 1% late this year. Therefore, we do not consider it temporary. As for the reduction in drug prices, this had an impact, and overall inflation declined more quickly than it would have otherwise. This was of course very important socially, but from our political point of view, it is more important how inflation behaves. Therefore, we still maintain a tight monetary policy. Despite the reduction of rates, we still expect that the rate will decrease, but the monetary policy will still remain tight during the year", said Mestvirishvili.
