Georgia sees decrease in annual inflation

Finance Materials 25 December 2020 18:29 (UTC +04:00)
Georgia sees decrease in annual inflation

BAKU, Azerbaijan, December 25

By Tamilla Mammadova – Trend:

Annual inflation retreated to 3.8 percent in November in Georgia compared to November 2019, Trend reports via Georgian Galt&Taggart analytics company.

This reduction in inflation reflected last year’s high base (7 percent from September through December 2019) as well as reduced oil prices. The pass-through effect of lari depreciation, planned gas price increase for commercial users from January 2021 and anticipated increases in utility prices expected to lift price pressures in 2021.

"Therefore, we expect inflation to remain above 3 percent target in 2021, dictating hold on the rate cut and see lari as a key factor for monetary policy considerations if currency’s weakness persists," the report said.

The National Bank of Georgia (NBG) cut the key rate three times this year by cumulative 1 ppts, with final cut in August to 8 percent and kept rate unchanged thereafter being cautious of lari weakness.

The fiscal deficit remains high in 2021 at 7.6 percent of GDP with both opex (+3.8 percent year-on-year) and capex growing (+5.2 percent year-on-year), the latter growth positive. In 2021, government plans to rollover the Eurobond (preserving international reserves) and not to raise domestic debt, which is lari positive.

Due to stimulus measures and lari depreciation, government debt is set at 60.1 percent of GDP in 2021 and will reduce to 57.6 percent of GDP in medium term. To maintain capex at high level (8 percent of GDP) in coming years will be one of the challenges considering need for fiscal consolidation, as law allows deficit to be above 3 percent of GDP for only 3 years.


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