How was low inflation achieved in Georgia? Low inflation in Georgia is explained by a gradual decline in world food prices and strict monetary policy, confirms National Bank of Georgia. In October 2023, annual inflation remained low at just 0.8% and, compared to September, prices rose by 0.6%.
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According to banking experts, low inflation in Georgia is explained, on the one hand, by the stabilization of world food prices, which removes pressure on price growth due to external shocks. In addition, transportation costs remain relatively low.
The impact of rising fuel and food prices on inflation growth in Georgia
“These factors, despite the recent slight decline in the value of the lari, coupled with a stable real exchange rate, have kept inflation low in Georgia. On the other hand, tight monetary policy also helps reduce inflation. In October, the largest contribution to the general price level was made by rising fuel prices: gasoline and diesel fuel rose in price by 9.8% and 9.3%, respectively, bringing 0.5% to monthly inflation. Recently, fuel prices have increased significantly, almost reaching the level of last year. Therefore, the impact of fuel prices on annual inflation in October was minimal.” – the regulator said in a statement.
Declining food prices and impact on inflation
“Food and non-alcoholic drinks prices fell 1.2% from last year, lowering annual inflation by 0.4 percentage points. The decline in food prices was associated with lower prices for oil, bread and cheese, which ultimately reduced inflation by 1.3 percentage points. This was offset by rising prices for commonly used drugs included in the consumer basket, which reduced inflation by 0.7 percentage points. At the same time, the cost of banking services and housing rentals increased by 0.4 and 0.2 percentage points, respectively. Core inflation, excluding prices for food, energy and cigarettes, was 2.1%” – reports the regulator.
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Deflation of imported and mixed goods
According to the National Bank, low inflation is due to deflation of imported and mixed goods, which, combined with the relative stability of prices for goods and transport services on world markets, ensures the stability of the real effective exchange rate. In October, a decrease in prices for imported and mixed goods was recorded at 1.6% and 3.6%, respectively.
The role of services in Georgian inflation
“Annual inflation of locally produced products decreased by 0.8% compared to the previous month and amounted to 4.5% in October. High local inflation is due to the annual increase in prices for services, which contributes 3.2% to local inflation. In particular, the rise in prices for banking services and rental housing as a result of the increase in the number of foreign citizens last year plays a significant role” – the regulator said in a statement
