Growth: Georgia’s economy grew by 8.3% y/y in Sep-24, following a 12.0% y/y growth in previous month. Cumulatively, real GDP growth came in at 9.8% y/y in 9M24. In September, there was notable growth in construction, financial and insurance, transport and storage and trade sectors, while the energy sector continued to contract. We are maintaining our real GDP growth projection of 9.0% for the full year 2024. For 2025, we expect Georgia’s economy to grow by 6.0%, in line with the latest IMF forecast.
Inflation: 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 from 1.1% y/y in 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.
Monetary policy: On October 23, 2024, the NBG’s Monetary Policy Committee kept its key rate unchanged at 8.0%, due to ongoing uncertainties. According to NBG, the war in Ukraine and rising geopolitical tensions in the Middle East may raise regional risk premiums and inflationary pressures. Additionally, stronger-than-expected domestic growth could contribute to demand-side price pressures. We expect that the NBG will maintain this rate throughout 2024.
FX: In October, the GEL faced sell-off pressure due election-related uncertainties, prompting the NBG to intervene by selling US$ 213.4mn in four FX auctions. After the election weekend, the GEL faced ongoing pressure, dropping to 2.75 per USD by October 31, 2024, down from 2.72 on pre-election day. We anticipate that depreciation pressure will continue due to ongoing post-election uncertainties (see here) and expect the GEL at c.2.8 against the USD by the end of 2024.
