Inflation to be higher than target in 2021 in Georgia - Galt & Taggart

Business Materials 12 January 2021 12:30 (UTC +04:00)

BAKU, Azerbaijan, Jan. 12

By Tamilla Mammadova – Trend:

Investment bank Galt & Taggart expects inflation to be higher than the target this year and will stand at 4.5 percent in Georgia, Trend reports via the bank.

Galt & Taggart review says that inflation expectations for 2021 are uncertain. Government utility bill assistance will have a positive effect on reducing the inflation rate, but on the other hand, power price hikes electricity for the commercial sector will create additional pressure on inflation.

However, Galt & Taggart believes that if tourism is partially restored in 2021, the lari’s exchange rate will remain at 3.1 during the year.

In December, the inflation rate in Georgia was -1 percent compared to the previous month, the annual inflation stood at 2.4 percent due to the government utility bills subsidies.

According to the bank, the investment bank forecasts an inflation rate of 4.5 percent this year.

Galt & Taggart's prediction is based on several assumptions, including the Georgian lari exchange rate, the risk of a pandemic and, consequently, quarantine prolongation, and rising world prices.

In addition, the document states that the National Bank will have the opportunity to reduce the monetary policy rate or the price of money in the event of a resumption of tourism, and the value of one USD will be about 3.1 lari (94 cents). At present, the monetary policy rate is quite high, at 8 percent.

Georgian National Energy and Water Supply Regulatory Commission (GNERC) data on the number of subscribers who benefited from the subsidy were used in the calculation, as well as information on the share of natural gas / electricity consumed by the subsidized subscribers in the total cost of natural gas / electricity spent in the reporting period.


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