Easing inflation supports hopes for rate cuts by year-end in Georgia
Georgia’s consumer prices increased at a moderate monthly rate (+0.1% m/m) for the third month in a row in August and the annual inflation rate eased to 10.9% y/y in the month from the peak level of 13.9% y/y in May, according to data from the statistics office Geostat.
Prices of food and transport (fuels included) rose by nearly 16% y/y while the prices in the HoReCa industry also increased by nearly 15% y/y. In contrast, the prices of clothing, communications as well as health and education systems increased by a couple of percentage points at most over the past year.
The core inflation also edged down, to 7.0% y/y in August from 7.1% y/y in July.
This supports expectations for possible rate cuts by the end of the year, which would bring the refinancing rate into the range of 10%.
Since March 30, the refinancing rate in Georgia is 11%.
TBC bank cut in July its forecast for Georgia’s inflation at the end of the year to 7.4% y/y from 8.5% previously.
Since 2018, economy has carried risk of severe balance of payments crisis. For the removal of that risk, the central bank’s net in and off-balance sheet FX position should at least turn positive.
Decline of 6.5% y/y is second worst in EU.
Retail sales rose by 0.9% m/m in October, recouping the losses incurred over the previous three months.
Czech retail sales decreased by 1.4% year on year and increased by 0.6% month on month in October, in the softest monthly drop in a year and a half. The drop in sales eased compared to the 4% y/y drop in September and the 2.8% y/y drop in August.
Despite lapse in demand, firms said to retain positive attitude on 12-month outlook for activity, which remained historically elevated. Inflationary pressures continued to retreat.
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