TBC Weekly Update from the Chief Economist

TBC Weekly Update from the Chief Economist

access_time2021-12-07 09:56:00

According to the initial estimates of GeoStat, real GDP came in at 6.9% YoY in October 2021, as expected, once again supporting our above 10% growth projection for 2021. From the sectors perspective, the growth turned out to be driven by almost all sectors, except construction, likely on the back of contractionary fiscal stance. In the same period, inflows showed quite strong dynamics, however, imports and credit cooled down.

November inflation was also in line with the expectations. After a spike on monthly seasonally adjusted inflation in October, November price increase was below the 3% target, similar to September. This, coupled with the recent GEL appreciation and lower oil prices is a strong argument supporting lower inflation going forward. In fact, unless the GEL weakens, assuming Brent oil at around 85 USD and 6% GDP growth next year, 2022 EOP inflation should stand well below the target being lower than our previous outlook, the difference arising only from the stronger GEL.

However, together with low inflation outlook in a way being an argument for the weaker GEL, an additional drop of lira and concerns over Omicron variant points to the GEL correction, though keeping in mind that the weakening of the lira only from the basket of Georgia’s trading partner currencies does not necessarily mean that the GEL should follow.


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