BAKU, Azerbaijan, Dec. 15
By Maryana Akhmedova – Trend:
The tightening of monetary policy in Georgia will be temporary and ease is expected in the future, Trend reports, citing weekly review from TBC Capital.
Meanwhile, contrary to the TBC Capital’s predictions, the National Bank of Georgia (NBG) hiked its monetary policy rate by 0.5 percentage points to 10.5 percent.
Although annual inflation is still expected to increase in December, this is only against the background of the effect of a low base a year ago, TBC Capital said.
Furthermore, according to the latest data, seasonally adjusted inflation already indicates price growth stabilization, even below the 3-percent target, the report said.
The relative decline in oil prices in international markets and the strengthening of the Georgian lari supports TBC Capital’s predicted inflation outlook close to the target in 2022.
According to the report, assuming Brent crude oil prices to recover to around $85 from their current $75 per barrel, other key commodities to stay at around the same level, global supply chain constraints to ease at least somewhat, the Georgian lari exchange rate to depreciate by around 5 percent, and the GDP to grow at 6 percent next year, the inflation should stand at around 3 percent in 2022.
Therefore, TBC Capital thinks that this hike in monetary policy tightening is temporary, and expects the refinancing rate to be around 8.25 percent by the end of 2022.
“At the same time, the relatively slow recovery of tourism and the materialization of geopolitical risks in the region are contributing factors to the high Georgian lari rates,” TBC Capital noted.
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