Growth: Georgia’s economy grew by 5.9% in Nov-23, in line with our expectations, after growing by 6.2% in October. Overall, in 11M23, growth reached 6.9%, in line with our 6.8% growth projection for the full year 2023. For 2024, we anticipate a growth rate of 5.4% in our baseline scenario and 6.0% in upside scenario (see details here).
Inflation: In Dec-23, annual inflation in Georgia stood at 0.4%, with average annual inflation reaching 2.5% for the year. The subdued inflation was driven by a 3.1% y/y decline in food prices, along with reduced inflation for imported and mixed goods by 0.2% y/y and 4.3% y/y in December, respectively. Domestically produced goods inflation reached 3.6% y/y in Dec-23 and core inflation remained low at 1.9% y/y. For 2024, we expect average annual inflation at 3.5%.
Monetary policy: On December 20, 2023, the NBG’s Monetary Policy Committee reduced its key rate by 50bps to 9.5% due to a larger-than-expected decline in inflation. The NBG plans to pursue a gradual normalization aligned with evolving inflation forecasts. We expect a 100bps rate cut to 8.5% in our baseline scenario by end-2024.
FX: The GEL appreciated slightly by 0.9% m/m in December against the dollar. Notably, the NBG was a net buyer of US$ 1.3bn in 2023. The expected solid external inflows and low current account deficit lead us to expect the GEL to remain stable at around 2.7 against the dollar and 3.0 against the Euro in 2024, respectively, in our baseline scenario.
