Real GDP growth accelerated to 11.0% y/y in Dec-22
The economic growth in Georgia accelerated to 11.0% y/y in Dec-22, after a 9.3% y/y growth in previous month, based on Geostat’s rapid estimates. Cumulatively, real growth stood at 10.1% y/y in 2022, in line with our expectation. The observed growth in December was largely driven by the construction, manufacturing, transportation and storage, financial, trade and hospitality sectors. Meanwhile, real estate operations, professional activities and utilities sectors contracted. We forecast real GDP growth at 4.8% in 2023 and 5.0% in 2024 (see here more details).
Inflation eased to 9.4% in Jan-23
Annual CPI inflation eased to 9.4% in Jan-23 from a 9.8% inflation in previous month. Contrary, core inflation (non-food, non-energy, and non-tobacco) increased to 7.7% (+1.0ppts m/m) in January. By categories, annual inflation was mostly driven by price changes in food and non-alcoholic beverages (+15.0% y/y, 5.03ppts), housing, water, electricity, gas and other fuels (+13.1% y/y, 1.38ppts), transport (+5.2% y/y, 0.63ppts), alcoholic beverages and tobacco (+8.7% y/y, 0.58ppts), restaurants and hotels (+14.7% y/y, 0.58ppts), furnishings, household equipment and maintenance (+10.1% y/y, 0.52ppts) and healthcare (-3.2% y/y, -0.33ppts) categories. On a monthly basis, there was a 0.8% inflation in Jan-23, driven by price increase in food and non-alcoholic beverages (+1.4% m/m, 0.46ppts) category. We forecast average annual inflation at 5.2% in 2023 and 3.8% in 2024.
NBG keeps key rate unchanged at 11.0%
The NBG kept its key rate unchanged at 11.0% on 1 February 2023 meeting. According to the NBG’s updated forecast, inflation will continue to decline and reach the target level in 2H23, due to the gradual neutralization of external factors and a stronger GEL along with the tight monetary policy and fiscal consolidation. However, the regulator warns that the current geopolitical situation still brings uncertainty and upward risks to inflation. The NBG also underlines inflationary pressure due to local wage growth outpacing labor productivity growth. Therefore, the NBG plans to keep a tight monetary policy throughout the year and begin monetary easing once inflation approaches the target. The next committee meeting is scheduled for 29 March 2023.
