BAKU, Azerbaijan, March 10
By Tamilla Mammadova – Trend:
The National Bank of Georgia (NBG) has the authority to target inflation, and when it sees risks to inflation, it takes appropriate action, said S&P Global analyst Aarti Sakuja, Trend reports via Georgian media.
"If impairment affects inflation expectations, the NBG sells foreign exchange reserves. In our opinion, the process of intervention will continue. In recent years, we have witnessed how the National Bank is actively increasing its foreign exchange reserves," he noted.
According to him, he makes it possible for these reserves to be sold. As for the lari exchange rate, we see that Georgia has a balance of payments deficit.
"When making a decision, the National Bank takes into account not only the needs of growth but also the expectations of inflation, because its task is to target inflation. A characteristic feature of the Georgian economy is that exchange rate fluctuations are reflected in inflationary expectations. In addition, there is the problem of dollarization of the economy," Sakuja noted.
The National Bank wants to reduce the level of dollarization of loans in the country in order to protect borrowers from the risk of currency devaluation, he said.
"Consequently, the combination of inflation, lari exchange rate and dollarization factors limits the space for monetary policy decision-making in Georgia, and the Central Bank is considering the level of price stability and dollarization in addition to the need for economic growth, Sakuja added.
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