The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on March 17, 2010 and decided to keep its Main Policy Rate (the refinancing rate) unchanged at 5 percent.

Several positive trends have been observed in February: money transfer inflows increased by annual 17.9 percent and preliminary data of trade statistics has shown significant increase in export volume. The volume of FDI comprised USD 759.1 mil. in 2009 and is expected to increase even more this year based on the current trends.

CPI has increased in February 2010 by 1.5% mainly due to the seasonal factors. The Annual rate of inflation stands at 5.6 percent. However, the inflation forecast has not changed much after the committee’s last meeting. Inflation is expected to remain around 6 percent mark in the medium term.

The unemployment rate has increased insignificantly on an annual basis and stands at 16.3%

Credit to the real economy has followed an increasing trend over the last two months and the growth rates of broad money aggregates have also increased significantly stimulating the aggregate demand and providing a basis for this year’s expectations of economic growth. 

In order to enhance domestic currency denominated lending and contribute to the development of the money market the NBG is planning to introduce new instruments in the next few weeks. Namely, the NBG will enact standing facilities, overnight credits and overnight deposits, aimed at reducing the volatility of the interbank money market rate. The NBG also plans to widen the eligible collateral base for refinancing loans. These instruments will make lending in Lari more attractive for the banks than lending in FX, thus creating incentives for the reduction of credit risk for the economy as a whole.

The National Bank of Georgia will closely monitor current developments in the economy and financial markets and will in due course act accordingly.

The next meeting of the Monetary Policy Committee will take place on April 14, 2010.