Monthly Economic Review - December 2024

Growth: Georgia’s economic growth slowed to 7.5% in Nov-24, after a 11.0% y/y growth in previous month. Cumulatively, real GDP growth came in at 9.4% y/y in 11M24.  In November, positive growth was recorded in the professional & scientific, ICT and transport sectors, while the manufacturing sector contracted. As growth was below our expectations in November, we are revising real GDP growth downward to 9.4% for the full year-2024, from the previous forecast of 9.7%.

Inflation: In Nov-24, annual inflation was 1.3%, up from 0.3% posted in October. This increase was mainly driven by a rise in mixed goods inflation to 3.1% y/y (-0.6% y/y in Oct-24). Meanwhile, inflation for domestically produced goods and services remained stable at 1.8% y/y, the same as the previous month, while imported inflation decreased by -1.7% y/y (-1.5% y/y in the previous month). Notably, core inflation, excluding volatile food, energy and tobacco prices, rose further to 1.6% y/y in Nov-24 from 1.2% y/y in October. 
We expect average annual inflation at 1.1% in 2024.

Monetary policy: On December 18, 2024, the Monetary Policy Committee of the NBG decided to maintain its key interest rate at 8.0%.  This decision was influenced by considerable uncertainty in the economic outlook, particularly concerning potential inflationary pressures from domestic factors and ongoing geopolitical tensions in the region. The regulator also emphasized the rising volatility of oil and food prices in international markets, warning that increases in global commodity prices could negatively affect local market prices and heighten inflation expectations.

FX: In Dec-24, the GEL faced downward pressure, depreciating by 1.0% m/m vs. the USD due to ongoing domestic political instability. For the entire year of 2024 average GEL/US$ exchange rate came in at 2.72, depreciating by 3.5% y/y. The NBG conducted FX interventions on both sides and ultimately was a net seller of US$ 463.4mn as of 11M24.