NBG cut its key rate by 50bps to 9.5%
The NBG decided to cut its key rate by 50bps to 9.5% at 20 December 2023 meeting. According to NBG, inflation in Georgia declined more than anticipated, standing at 0.1% y/y in Nov-23. Core inflation echoed this decline, settling at 1.8%. Simultaneously, inflation for domestically produced goods is steadily approaching the 3.0% target, reaching 3.8% in November. This movement is influenced by both domestic and external factors. Based on NBG’s current forecast, inflation is expected to temporarily surpass the target rate in 2024, mainly due to the base effect. However, in the medium term, it is anticipated to stabilize close to the target. The NBG notes that, despite the current reduction, the monetary policy rate is being maintained at a relatively elevated level and plans to pursue only a gradual normalization of monetary policy, aligning with evolving inflation forecasts. The next committee meeting is scheduled for 31 January 2024.
Real GDP growth was 5.7% in 3Q23
Georgia’s economy grew by 5.7% y/y in 3Q23 according to Geostat, revised upwards from the preliminary estimate of 5.4%. In terms of economic sectors, high contributions to the growth in 3Q23 came from trade (+8.1% y/y), public administration (+13.3% y/y), construction (+8.5% y/y), finance & insurance (+13.7% y/y), education (+13.6% y/y), professional activities (+17.6% y/y) and agriculture (+4.3% y/y). Meanwhile, healthcare (-7.5% y/y) and real estate (-1.0% y/y) sectors contracted in 3Q23.
Considering rapid estimate of real GDP growth of 6.2% in Oct-23, cumulatively Georgia’s economy increased by 7.0% y/y in 10M23. For the full 2023 year, we expect growth at 6.8%. In 2024, we forecast real GDP growth at 5.4% in baseline scenario and at 6.0% in upside scenario, see more here.
Goods trade deficit narrowed by 11.1% y/y in Nov-23
In Nov-23, goods exports declined by 1.8% y/y to US$ 482.0mn, after a 10.3% y/y growth in previous month. Similarly, goods imports also contracted by 7.6% y/y, reaching US$ 1.2bn in November, after growing by 4.8% y/y in October. Consequently, the trade deficit narrowed by 11.1% y/y to US$ 729.5mn.
The top 5 exported commodities were cars (+81.8% y/y), spirits (+74.5% y/y), wine (-27.4% y/y), copper (-76.5% y/y) and nuts (-10.9% y/y), in Nov-23. A 11.8% of exports were directed to the EU (-31.7% y/y), 69.2% to the CIS (+25.5% y/y) and 19.0% to other countries (-35.3% y/y).
The top 5 imports were cars (-8.5% y/y), petroleum (+24.9% y/y), pharmaceuticals (+39.7% y/y), gases (-33.1% y/y) and phones (-6.1% y/y) in Nov-23.
Overall, in 11M23, trade deficit expanded by 19.8% y/y to US$ 8.4bn, as exports increased by 11.1% y/y to US$ 5.6bn, while imports were up by 16.1% y/y to US$ 14.0bn.
Producer price index declined by 0.2% y/y in Nov-23
Annual PPI for industrial goods declined by only 0.2% in Nov-23, after falling by 0.8% in previous month, according to Geostat. Notably, on a monthly basis, there was a 0.6% increase in the PPI for Nov-23. This monthly growth was primarily driven by a rise in prices in the manufacturing sector (+1.0% m/m), followed by mining (+3.5% m/m). Meanwhile, prices in electricity supply declined (-4.0% m/m) in November.
