Georgia leaves refinancing rate unchanged at 7%
TBILISI. Oct 24 (Interfax) - The National Bank of Georgia's Monetary Policy Committee decided at a meeting on Wednesday to leave the refinancing rate unchanged at 7% annually, the bank reported.
"The annual inflation has decreased in the beginning of 2018 and, in line with previous forecasts, remains within the target rate of 3%," the National Bank said.
Inflation slowed to 2.7% in September on an annual basis and is expected to fluctuate around the target rate this year and in the medium term.
The National Bank noted the recent increase in macroeconomic risks from the external sector, activating negative expectations and causing increased volatility on the foreign exchange markets. "Despite these risks the significant deviation of inflation from its target is not expected since, due to the lower than expected economic activity, the risks pushing inflation upwards have declined," it said.
The National Bank estimates there is still need for policy normalization, that is, gradual policy easing. However the speed of normalization will depend on one hand on how fast the output gap will close and on the other how strongly increased regional macroeconomic risks will be transmitted to Georgian economy.
"Despite the recent increase in volatility, the positive trends in the external sector have been maintained, however with a certain decline in the external demand growth rates. Goods export annual growth rate in the third quarter was 21% whereas the tourist revenues have grown by 21%. The positive trend has continued in the growth of the remittances from abroad - 12% annually. At the same time the import growth is quite high as well (at 12%)," it said.
The National Bank approved a cut in the refinancing rate for the first time in nearly two years on July 25, 2018, to 7% from 7.25%. It decided to leave the rate unchanged at the September 5 meeting.
The National Bank's inflation target in 2018 and the following two years is at the 3% level. The government forecasts that inflation this year will be about 3.5%.