Central bank keeps refinancing rate at 11%

  • The NBG named the “record level” of remittances, tourism recovery and strong credit activity among the reasons for the rapid growth of economic activity in the country. Photo: Nino Alavidze/Agenda.ge

Agenda.ge, 3 Aug 2022 - 13:01, Tbilisi,Georgia

The National Bank of Georgia has decided to keep the refinancing rate unchanged at 11 percent following a meeting of its Monetary Policy Committee on Wednesday.

The country’s financial institution highlighted inflationary risks still remained a “current global challenge,” noting elevated prices on international markets “severely affected” most countries worldwide, including Georgia. 

The sanctions imposed against Russia and the additional supply-side disruption stemming from the Russia-Ukraine war have significantly raised international prices on food, energy and other commodities,” the bank said.

It also noted the inflation rate in Georgia remained high, amounting to 11.5 percent in July and forecasted the figure would tend to decline in the current and next years, adding it would gradually approach the target level from the second half of 2023. 

A faster decline in inflation is hindered by growing aggregate demand, to which high consumption makes a significant contribution [...] Against the backdrop of consecutive shocks, inflation has long deviated from the target level, which further amplifies inflationary risks,” the central bank concluded.

The NBG named the “record level” of remittances, tourism recovery and strong credit activity among the reasons for the rapid growth of economic activity in the country.

Additionally, it said the credit activity was still high during the ongoing year despite the tight monetary policy, naming excessive growth of consumer loans and foreign currency loans as the reasons for the latter. The NBG predicted the economic growth in the country in 2022 would reach 9 percent. 

The next meeting of the MPC in Georgia will be held on September 14.

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