Georgian National Bank raises monetary policy rate from 10.5% to 11%

TBILISI. March 30 (Interfax) - The Monetary Policy Committee (MPC) of the National Bank of Georgia made a decision to raise the monetary policy rate from 10.5% to 11% on March 30, the National Bank said in a statement.

Events in Ukraine and the Western sanctions against Russia have led to higher inflation risks and have "slowed the projected pace of decline of already high global inflation," the statement said.

"Georgia had an annual inflation rate of 13.7% in February. Reduction of inflation is expected from March, mainly related to the elimination of the base effect of the subsidy of utility bills. However, without the new shock, this reduction would have been much larger," it said.

Sanctions against Russia have significantly increased prices on a number of categories of products on global markets, on fuel above all, the statement said. "In addition, amidst rising risks of lower external inflows, volatility in foreign exchange markets has increased, leading to additional risks in terms of inflation expectations," it said.

"According to the current forecast, other things being equal, inflation will start declining from March, although it will remain above the target during the year," the statement said.

Expectations are for credit activity to be moderately high throughout the year, it said.

In accordance with previous forecasts, GDP was expected to grow 5% in 2022, but from the current perspective, it is expected to grow in the range of 3%-4%, the statement said. "Amid the expected slowdown in economic growth, inflationary pressure stemming from aggregate demand will be weak, and supply-side factors will remain dominant throughout the year," it said.

As concerns foreign demand, following significant recovery in 2021 and at the beginning of 2022, certain risks emerged in this area, which are connected to an expected decrease in foreign demand from two of Georgia's most important trading partners, the statement said.

The MPC will hold its next meeting on May 11, 2022.