BAKU, Azerbaijan, March 19. The refinancing rate in Georgia in the first half of 2022 may increase by 1.5 percentage points to 12 percent, Trend reports via economic review from the Renaissance Capital investment bank.
Meanwhile, the National Bank of Georgia (NBG) already increased the refinancing rate in Georgia by 0.5 percent to the current rate of 10.5 percent on December 8, 2021.
According to Renaissance Capital, the potential external inflation pressure remains another source of concern for Georgia which entered the year with 14 percent year-on-year inflation rate.
The bank expects inflation rate in Georgia to decrease tangibly in March 2022, however, there are additional inflation risks stemming from 3-6 percent weakening of the national currency (Georgian lari), and the growth of fuel and food prices.
According to the statistics, 80 percent of Georgia’s energy production comes from hydro-energy that curb the pressure from global fuel prices’ spike, but domestic gasoline prices’ increase remains a concern, the Renaissance Capital said.
“At the same time, given that the current external development also curbs economic growth, the NBG could avoid additional hike but instead keep the flat rate for longer,” the bank noted.
In this sense, the dynamics of the demand for foreign exchange in the country, and Georgian lari exchange rate, are to monitor. An additional pressure of the national currency to above 3.4 Georgian lari/$ makes the monetary tightening inevitable, the Renaissance Capital said.
---
Follow the author on Twitter: @mariiiakhm