The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on October 24, 2018 to and decided to keep the refinancing rate unchanged at 7.0 percent.
The annual inflation has decreased in the beginning of 2018 and, in line with previous forecasts, remains within the target rate of 3%. In September the annual inflation reached 2.7%. According to current forecast, other things equal, the inflation both this year and in the medium term will fluctuate around the target rate. The macroeconomic risks coming from the external sector have risen recently, activating negative expectations and causing increased volatility on the foreign exchange markets. Despite these risks the significant deviation of inflation from its target is not expected since, due to the lower than expected economic activity, the risks pushing inflation upwards have declined. According to the NBG estimates there still is the necessity of policy normalization – that is, gradual policy easing. However the speed of normalization will depend on how fast the output gap will close on one hand and how strongly will the increased regional macroeconomic risks be transmitted to Georgian economy – on the other.
Despite the recent increase in volatility, the positive trends in the external sector have been maintained, however with a certain decline in the external demand growth rates. Goods export annual growth rate in the third quarter was 21% whereas the tourist revenues have grown by 21%. The positive trend has continued in the growth of the remittances from abroad – 12% annually. At the same time the import growth is quite high as well (at 12%).
The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal in order to ensure the price stability.
The next meeting of the Monetary Policy Committee will be held on December 12, 2018.