Monthly Economic Review - Record Low Unemployment Rate

Growth: Georgia’s economic growth accelerated, up by 11.8% in Apr-24, after a 8.2% y/y growth in previous month. Cumulatively, real GDP growth came in at 9.0% y/y in 4M24. In April, real growth was recorded in the manufacturing, construction, ICT, transport, professional & scientific activities and trade sectors. In contrast, the energy sector contracted during the same period. We maintain our baseline 6.0% growth scenario for the full-2024 year, which reflects actual strong growth of 4M24 and expected slowdown in investment activity in 2H24 driven by uncertainties stemming from domestic political tensions.

Inflation: In Apr-24, annual inflation rose to 1.5%, up from the 0.5% print in previous month.  This increase was primarily driven by a 3.5% y/y rise in imported inflation (+1.6% in Mar-24), while domestic inflation remained nearly unchanged at 2.5% y/y compared to the previous month. Notably, core inflation, excluding volatile food, energy and tobacco prices, stood at 2.3% y/y in Apr-24, unchanged from the previous month. 
We maintain our average annual inflation forecast at 3.0% for 2024.

Monetary policy:  On May 22, 2024, the NBG’s Monetary Policy Committee reduced its key rate by 25bps to 8.0%, considering the low inflation environment. We do not anticipate further rate cuts through 2024.

FX: The GEL began weakening in mid-May due to domestic political tensions. To stabilize the market, the NBG intervened by selling US$ 108.7mn. As a result, the GEL stabilized at 1$/2.8, depreciating by 4.2% m/m against dollar in May-24. We anticipate an average GEL rate of 2.78 against the dollar for 2024, revised upwards from the previous forecast of 2.70.