BAKU, Azerbaijan, June 2
Tamilla Mammadova – Trend:
The possible further tightening of monetary policy depends on inflation expectations and the dynamics of the factors affecting it, said the Governor of the National Bank of Georgia (NBG) Koba Gvenetadze, Trend reports via Georgian media.
He made the remark at the sitting of the Parliamentary Committee on Finance and Budget, where he presented a report on the activities of the NBG in 2020.
"As a result of COVID-19 pandemic, international tourism in the world has practically stopped, due to which tourism-dependent countries, including Georgia, have been particularly affected. Against the background of global tourism halt, revenues from foreign tourism decreased significantly, which increased the current account deficit and sharply depreciated the effective exchange rate of the lari, which was also reflected in prices. As a result, the inflation rate in 2020 reached a peak of 6.9 percent in April. Due to high dollarization, exchange rate depreciation has also increased the cost of servicing loans to non-hedged producers," he said.
As he noted, in addition, the rate of virus spread increased dramatically, leading to additional constraints and, as a result, the maintenance of supply-side factors influencing growth. Inflation fell sharply to 2.4 percent in December 2020, mainly due to government subsidies on utility bills. Inflation averaged 5.2 percent during 2020.
"The possible further tightening of monetary policy depends on inflation expectations and the dynamics of the factors affecting it. According to the current forecast, inflation will remain above the 3 percent target for the next year and will move towards the target next year under other equal conditions, which a strict monetary policy will facilitate. Although we must emphasize that the forecast accuracy depends on uncertainty, which at this stage remains at a high level in both directions," said Gvenetadze.
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