National Bank of Georgia forecasts inflation to decline in 2022

Georgia Materials 24 December 2021 16:39 (UTC +04:00)
National Bank of Georgia forecasts inflation to decline in 2022

BAKU, Azerbaijan, Dec. 24

By Maryana Akhmedova – Trend:

The inflation rate in Georgia will start to decline from the second quarter of 2022 and will gradually return to the target of 3 percent, under the tightened monetary policy, Trend reports via the macroeconomic forecast of the National Bank of Georgia (NBG).

According to the baseline forecast, despite the next wave of the COVID-19 pandemic, the recovery of global economic activity in 2021-2022 will continue at a high pace, the report said.

At the same time, the baseline scenario provides for maintaining a high level of inflation above the target this year, which is mainly due to an increase in commodity prices on international markets.

The baseline, optimistic and downside scenario envisages 9.5 percent inflation this year. However, according to the baseline scenario, inflation should be reduced by 1.5 percent in 2022. The upside scenario predicts inflation at 5.5 percent.

However, according to the macroeconomic scenarios of the 2022 budget, it is expected that the average inflation during the year will be higher than the target and equal to the base scenario at 8.9 percent, and will return to the target in the second half of 2022.

Meanwhile, the Georgian lari exchange rate to the dollar will remain unchanged in 2021-2024 and will strengthen by 4 percent in 2022, the NBG forecasts.

As for economic growth, according to the baseline scenario, it will be 10 percent in 2021, and a 5-percent growth is expected in 2022.

The NBG also makes a forecast on unemployment. According to all its scenarios, the unemployment rate will increase by 2 percent in 2021. The unemployment in the baseline scenario will decrease by 1.5 percent in 2022, while in the optimistic scenario it will decrease by 2 percent, and in the pessimistic scenario, it will increase by 0.5 percent.

In terms of the monetary policy rate, the NBG is leaving it unchanged in 2021 according to all scenarios. The loans issued will become cheaper for a large part of the population in 2022, under the baseline (decrease by 2 percent) and optimistic (decrease by 2.5 percent) scenarios. As for the pessimistic scenario, the NBG predicts a 0.5 percentage point increase in the monetary rate.


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