Growth: Georgia’s economic growth accelerated, up by 11.1% y/y in Jan-25, after a 6.7% y/y growth in previous month. This growth was mainly driven by increased activity in the professional & scientific, transport, construction, ICT, manufacturing and trade sectors, while the mining sector contracted. Given January’s strong growth, we will consider an upward revision to our baseline growth projection of 5% for the full year 2025 after February’s preliminary data becomes available.
Inflation: In Jan-25, annual inflation was 2.0%, up from 1.9% posted in Dec-24. The annual inflation was primarily driven by a 2.3% y/y rise in domestic inflation (+2.2% y/y in Dec-24), followed by a 3.5% y/y increased in mixed goods inflation (+3.9% y/y in Dec-24). Meanwhile, imported inflation declined by -0.4% y/y (-0.9% y/y in the previous month). Notably, core inflation, excluding volatile food, energy and tobacco prices, slowed to 2.0% y/y in Jan-25 from 2.3% y/y in December. We expect average annual inflation at 3.9% in 2025.
Monetary policy: On January 29, 2025, the Monetary Policy Committee of the NBG decided to maintain its key interest rate at 8.0%. While 2024 experienced robust economic growth and inflation remained below the 3.0% target, the NBG cited significant uncertainty as the main reason for keeping the rate unchanged. This uncertainty arises from both domestic economic conditions and ongoing geopolitical instability. We anticipate that the NBG will maintain the refinancing rate at 8.0% throughout 2025.
FX: In Feb-25, the GEL strengthened by 2.0% m/m against the USD, reflecting solid macro fundamentals. We anticipate average GEL rate at 2.88 vs dollar in 2025.
