Monthly Economic Review - Record high tourism revenues

Growth: Georgia’s economy grew by 7.5% in Jun-24, following a 9.2% y/y growth in previous month. Cumulatively, real GDP growth came in at 9.0% y/y in 1H24. In June, real growth was recorded in the financial & insurance, construction, ICT, transport and professional & scientific activities sectors. Meanwhile, the manufacturing sector contracted in the same period. We maintain our real GDP growth forecast at 7.0% for the full-2024 year.

Inflation: In Jun-24, annual inflation rose to 2.2%, up from the 2.0% print in previous month. This increase was primarily driven by a 2.8% y/y rise in domestic inflation (+2.5% in May-24), followed by a 3.3% y/y increase in imported inflation (+3.8% y/y in May-24). Notably, core inflation, excluding volatile food, energy and tobacco prices, reduced further to 1.4% y/y in Jun-24 from 1.7% y/y recorded in previous month.  
Given the lower-than-expected inflation in 1H24, we revise our average annual inflation forecast to 2.5% for 2024, down from the initial forecast of 3.0%.

Monetary policy: On July 30, 2024, the NBG’s Monetary Policy Committee kept its key rate unchanged at 8.0%, citing increased inflationary risks from volatile international oil and food prices and higher shipping costs from China. We anticipate that the NBG will maintain this rate throughout 2024.

FX: The GEL strengthened in July, supported by robust economic fundamentals. Notably, the NBG was a net buyer of US$ 67mn in 1H24 (purchased US$ 286.6mn and sold US$ 219.8mn), and gross international reserves stood at US$ 4.6bn as of Jun-24. We anticipate an average GEL rate of 2.77/1$ and 3.0/1€ for 2024.