Annual inflation was 0.6% in Sep-24
In Sep-24, annual inflation eased further to 0.6%, down from 1.0% in August. The slowdown was mainly driven by a deceleration in imported inflation, which slowed to 1.4% y/y in Sep-24 from 3.0% y/y in Aug-24. Additionally, mixed goods inflation declined by 1.1% y/y in September, similar to the previous month. Domestic inflation rose slightly to 1.2% y/y in Se-24, compared to the previous month. Notably, core inflation, excluding volatile food, energy and tobacco prices, edged down to 0.8% y/y in Sep-24 from 0.9% y/y in August.
By categories, annual inflation in Sep-24 was largely driven by price changes in transport (+4.3% y/y, +0.52ppts), alcoholic beverages & tobacco (+4.9% y/y, +0.34ppts) and hotels & restaurants (+7.5% y/y, +0.25ppts) categories. Conversely, there were notable price declines in communication (-12.8% y/y, -0.48ppts) and utilities (-2.9% y/y, -0.23ppts) categories.
On a monthly basis, there was a 0.3% y/y inflation in Sep-24, mainly due to rising prices in education (4.4% m/m, +0.22ppts) and clothing and footwear (+3.3% m/m, +0.13ppts) categories.
Tourism revenues estimated at US$ 450mn in Sep-24
Tourism revenues increased by 7.4% y/y to US$ 450mn in Sep-24, according to our estimates. Overall, in 9M24 tourism revenues reached US$ 3.6bn (+11.3% y/y) by our estimates. We forecast tourism revenues at US$ 4.4bn for 2024, up from US$ 4.1bn in 2023.
Government targets a 2.5% deficit in the 2025 draft budget
The government has submitted an initial draft of the 2025 state budget to Parliament, targeting 5.5% economic growth and a 3.0% GDP deflator for 2025. Similar to 2024, the fiscal deficit is planned at 2.5% of GDP for 2025 at the consolidated level. Notably, tax revenues are expected to increase by 6.6% y/y, reaching 25.1% of GDP, while privatization revenues are set at GEL 350mn. Total expenditures for 2025 are budgeted at 30.2% of GDP, with capex accounting for 7.4% of GDP, down from the 8.3% in 2024E. Total public debt to GDP is projected at 36.8% (2024E 36.5%), reflecting reduced share of external debt (2025F 24.9% of GDP vs. 2024E 25.4%) and an increased share of domestic debt (2025F 11.9% of GDP vs. 2024E 11.1%).
