Growth: Georgia’s economic growth was 7.7% y/y in Feb-25, after a 11.1% y/y growth in previous month. Cumulatively, real GDP growth reached 9.4% y/y in 2M25. This growth was mainly driven by increased activity in the professional & scientific, ICT, transport, energy and mining sectors, while the manufacturing and construction sectors contracted. Due to stronger-than-expected growth in 2M25, we raised our baseline real GDP growth forecast to 6.8% from previous projection of 5.0% for 2025.
Inflation: In Feb-25, annual inflation in Georgia rose to 2.4%, up from 2.0% in the previous month. This increase was mainly driven by a rise in domestic inflation to 3.0% y/y in Feb-25 (up from 2.3% y/y in Jan-25), alongside an increase in imported inflation (+0.5% y/y in Feb-25 vs. -0.4% y/y in Jan-25). Meanwhile, inflation for mixed goods slightly slowed to 3.1% y/y in February, down from 3.5% y/y in Jan-25. Notably, core inflation, excluding volatile food, energy and tobacco prices, remained unchanged at 2.0% y/y in Feb-25. We expect average annual inflation at 3.7% in 2025, revised downwards from previous forecast of 3.9%.
Monetary policy: On March 12, 2025, the Monetary Policy Committee of the NBG maintained its key interest rate unchanged at 8.0%. This decision considered January’s strong economic growth, rising inflation in February and the increased global uncertainty from tariff policies. The NBG anticipates inflation to converge its target level in 1H25, with a potential temporary increase before stabilizing around 3.0% in the medium term. We anticipate that the NBG will maintain the refinancing rate at 8.0% throughout 2025.
FX: In Mar-25, the GEL further strengthened by 1.8% m/m against the USD, reflecting solid macro fundamentals and some improvement in sentiment. We anticipate average GEL/1$ at 2.85 in 2025, revised downwards from previous forecast of 2.88.
