The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on May 25, 2010 and decided to keep its Main Policy Rate (the refinancing rate) unchanged at 5 percent.

The annual inflation rate in April of 2010 was 5.6 percent. Inflation dynamics are in accordance with the existing forecasts. Inflation forecast have not changed significantly since the Committee’s last meeting and in the medium term, inflation should stay around the six (6) percent.

Lending by banks to the economy has increased considerably over the last period, due to lending in domestic currency. Loans issued in foreign currency are still decreasing. The growth in domestic currency lending will be an important determining factor for current-year economic growth, and should reduce external risks to the economy in the future.  

A marked increase in imports in the March-April period is worth noting, which is a result of the pick-up in economic activity and the growth in lending.  Export dynamics are optimistic; during the first four months of the year, exports grew faster than imports, although in absolute terms, the trade account deficit increased over the last two months. The growth in exports was mainly due growth in prices of large, export commodities. Compared to March, remittances decreased in April, although the annual growth rate is still high and stands above 20%.

The NBG will closely monitor current developments in the economy and financial markets and will act accordingly.

The next meeting of the Monetary Policy Committee will take place on June 23, 2010.