Growth: Georgia’s economic growth was 8.2% in Mar-24 (above our expectations), after a 9.5% y/y growth in previous month. Cumulatively, real GDP growth came in at 7.8% y/y in 1Q24. In March, real growth was recorded in the manufacturing, ICT, professional & scientific activities and real estate sectors. In contrast, the construction, energy and transportation sectors contracted during the same period.
Inflation: In Mar-24, annual inflation was 0.5%, mostly affected by a 4.1% y/y decline in food prices and a 8.1% y/y increase in prices in the transport category. Core inflation, excluding volatile food, energy and tobacco stood at 2.3% y/y in Mar-24. Notably, domestically produced goods and services prices increased by 2.6% y/y in March (+2.4% in Feb-24). We forecast average annual inflation at 3.0% for 2024.
Monetary policy: On March 13, 2024, the NBG’s Monetary Policy Committee reduced its key rate by 75bps to 8.25% considering the low inflation environment along with reduced inflationary risks related to Red Sea tensions. We expect a further 25bps rate cut to 8.0% in our baseline scenario by end-2024.
FX: The GEL remained stable at around 2.7 vs. the US dollar year-to-date amid solid FX inflows. This enabled NBG to continue building reserves, purchasing US$ 213.5mn in 1Q24. We anticipate an average GEL rate of 2.7 against the dollar and 3.0 against the Euro in 2024, respectively.
