...

Monetary policy in Georgia remains tightest among CIS - Renaissance Capital

Business Materials 27 November 2020 21:43 (UTC +04:00)
Monetary policy in Georgia remains tightest among CIS - Renaissance Capital

BAKU, Azerbaijan, Nov. 27

By Tamilla Mammadova – Trend:

Georgia has adopted a two-month plan to contain the spread of COVID-19, which, among other things, provides for tougher quarantine restrictions, Trend reports via the Renaissance Capital PR.

"The lockdown will clearly took its toll on the economic activity in December-January, but we still expect that the GDP will come out slightly better than our previous forecast, at -5.5 percent year-on-year vs -5.8 percent expected earlier (-5 percent year-on-year in 9M2020 preliminary)," the report said.

This is to be followed by a 6.1 percent year-on-yea growth rebound in 2021, said the report.

"We see inflation around 3 percent year-on-yea somewhere around mid-2021 after a short-term increase to 4.5 percent in 1Q2021 (3.8 percent year-on-yea in October)," the report said.

A disinflation effect of a weaker consumer activity amid a re-imposed lockdown in December-January will mostly compensate for inflationary effects of lari weakening and costs’ increase.

"We expect the lari weakness – that was spurred by political uncertainty – to be mostly short-lived and see it at 1$/3.1 lari within 1Q2021 and $1/2.95 lari within 6M2020. This will provide a room for the NBG to resume monetary easing as soon as in 1Q2021 and to cut the rate to 6 percent (that we estimate as a neutral) by end-2021, we forecast," the report said.

For now, monetary policy in Georgia is the tightest among CIS+ measuring in terms of real rate versus neutral real rate leaving a room for sizable rate cuts.

---

Follow the author on Twitter: @Mila61979356

Tags:
Latest

Latest