Baku, Azerbaijan, October 1
By Tamilla Mammadova – Trend:
The annual inflation rate in Georgia reached 4.6 percent in July, which is 1.6 percentage points higher than the targeted 3 percent, Trend reports referring to ISET-PI, a think-tank based at International School of Economics of Tbilisi State University.
The main contributor to the annual price increase was the increased excise tax on tobacco (making the excise tax equal on filtered and unfiltered cigarettes) and increased food prices, which contributed to annual inflation by 0.9 and 2.2 percentage points respectively; increased bread prices contributed 0.5 percentage points to annual inflation).
According to the report, this type of tax hike (excise on tobacco) can increase only the prices, not the inflation rate, as it is a one-time factor, and this effect is expected to be exhausted next year. Core inflation (inflation excluding the most volatile petroleum and food prices) remains at a low level of 1.9 percent, while the annual inflation of imported goods reached 4.8 percent.
It is expected that the recent lari depreciation with respect to the currencies of the major trading partners most probably will lead to increased prices of imported products, which would further exacerbate the upward pressure on prices and inflationary expectations emerge.
Hence, the National Bank of Georgia increased the Monetary Policy Rate (MPR) by 0.5 percentage points in September to the level of 7 percent, which restricts borrowing and is expected to have a negative impact on the future growth rate. According to the model, the inflation rate has a negative contribution to the growth forecast.