Growth: Georgia’s economic growth was 9.0% y/y in Mar-25, after a 7.7% y/y growth in previous month. Cumulatively, real GDP growth reached 9.3% y/y in 1Q25. This growth was mainly driven by increased activity in the ICT, professional & scientific, financial, transport and construction sectors, while manufacturing sector contracted. We forecast Georgia’s real GDP growth at 6.8% in 2025.
Inflation: In Mar-25, annual inflation in Georgia rose to 3.5%, up from 2.4% in the previous month. This increase was mainly driven by a further rise in domestic inflation to 4.0% y/y in Mar-25 (up from 3.0% y/y in Feb-25), along with a 5.7% y/y rise in mixed goods inflation (up from 3.1% y/y in Feb-25). Meanwhile, imported inflation was just 0.2% y/y in March (down from 0.5% y/y in Feb-25). Notably, core inflation, excluding volatile food, energy and tobacco prices, increased to 2.4% y/y in Mar-25, following a 2.0% posted in previous month. We expect average annual inflation at 3.7% in 2025.
Monetary policy: On March 12, 2025, the Monetary Policy Committee of the NBG maintained its key interest rate unchanged at 8.0%. This decision considered January’s strong economic growth, rising inflation in February and the increased global uncertainty from tariff policies. The NBG anticipates inflation to converge its target level in 1H25, with a potential temporary increase before stabilizing around 3.0% in the medium term. We anticipate that the NBG will maintain the refinancing rate at 8.0% throughout 2025.
FX: In Apr-25, the GEL further strengthened by 0.6% m/m against the USD, supported by FX inflows and a global weakening of the dollar. Notably, GEL’s appreciation trend enabled the NBG to intervene in the FX market by purchasing US$ 101.7mn to replenish its FX reverses. We now anticipate average GEL/1$ at 2.82 in 2025, revised from previous forecast of 2.85.
