Growth: Georgia’s economy grew by 11.0% in Oct-24, following a 8.3% y/y growth in previous month. Cumulatively, real GDP growth came in at 10.0% y/y in 10M24. In October, there was notable growth in the construction, manufacturing, financial and insurance, ICT, transport and storage and trade sectors. Due to stronger-than-expected growth in 10M24, we raised our full-year 2024 real GDP growth forecast to 9.7%, up from 9.0%. For 2025, we are maintaining our real GDP growth forecast at 6.0%.
Inflation: In Oct-24, annual inflation was 0.3%, down from 0.6% posted in September. This slowdown was mainly driven by a decrease in imported inflation (-1.5% y/y, down from +1.4% y/y in the previous month), followed by a 0.6% y/y decline in mixed goods inflation (-1.1% y/y in Sep-24). Meanwhile, inflation for domestically produced goods and services accelerated, increasing by 1.8% y/y in Oct-24, following a 1.2% y/y increase in previous month. Notably, core inflation, excluding volatile food, energy and tobacco prices, rose to 1.2% y/y in Oct-24 from 0.8% y/y in September.
Monetary policy: On October 23, 2024, the NBG’s Monetary Policy Committee kept its key rate unchanged at 8.0%, due to ongoing uncertainties. The conflict in Ukraine and rising geopolitical tensions in the Middle East could increase regional risk premiums and potentially lead to inflationary pressures. Additionally, stronger-than-expected domestic growth may also contribute to upward price pressures in the future.
We expect that the NBG will maintain monetary policy rate at 8.0% throughout 2024 and 2025.
FX: In Nov-24, the downward pressure on GEL subsided, after NBG sold US$ 591.1mn in the FX market in October. However, ongoing domestic political instability is currently exerting downward pressure on GEL. Therefore, we expect the average GEL/USD exchange rate to fall within the range of 2.8-2.9 in December 2024.
