The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on January 30 and decided to cut the refinancing rate by 25 basis points. Currently, the policy rate stands at 6.75 percent.

Over 2018, in line with the forecasts, inflation rate remained around the target level of 3%. In December, the annual inflation equaled 1.5 percent. According to the forecasts, other factors being equal, inflation is expected to fluctuate near the target level.

In July 2018, the NBG started the gradual exit from the moderately tightened monetary policy. After the previous Committee meeting, along with the reduction of macroeconomic risks coming from the external sector, the upward risks to the inflation forecast have also abated. Considering that the inflationary pressure from the aggregate demand remains weak, the Monetary Policy Committee deemed appropriate to cut the policy rate.

According to the forecast, the monetary policy rate is expected to be reduced further over the year. The speed of normalization will depend on how fast the output gap will close on one hand and how strongly the increased regional macroeconomic risks will be transmitted to Georgian economy – on the other.  

The positive trends in the external sector have been maintained. The annual growth rate of goods exports in 2018 equaled 23% whereas the tourism revenues grew by 18%. However in the second half of 2018, the growth of both domestic and external demand somewhat declined.

The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal to ensure the price stability.

The next meeting of the Monetary Policy Committee will be held on March 13, 2019.