The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on July 21, 2010 and decided to raise its Main Policy Rate (the refinancing rate) to 6.5 percent.

Taking into consideration the existing signs of economic recovery during the first half of the year, the forecasted GDP growth rate for 2010 stands at 4.6 percent. Economic growth during the current year has largely been a result of trade, manufacturing, transport and financial sectors. It is expected that in the medium term inflation should stay within the 6 percent range, although minor upward risks do exists.

Despite the small decrease, annual growth rate of the monetary aggregates still remains high.  The growth of the money supply is on the one hand a result of fiscal economic stimulus, and on the other hand, of increased lending to the economy from the beginning of the year.

Inflows resulting from expedited money transfers increased in June. A reduction in inflows from Greece, Spain and Ukraine is notable, which mainly is a result of existing economic conditions.

According to the available information, risks for future economic scenario are at both directions. On the one hand, the growth in monetary aggregates and lending to the economy is a sign of quick economic recovery, although on the other hand, prospect for foreign direct investment still unclear.

The NBG will closely monitor 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 August 18, 2010.