Prices in Georgia on downward trend
By Sabina Idayatova
Annual inflation was a negative 1.4% in Georgia in December 2012, further down from -0.5% in November, according to figures released on Thursday by the Georgian state statistics body, civil.ge website reported.
Prices on food and non-alcoholic beverages were down; there was a 3.6% decline in prices in recreation and culture, and prices for clothing, communication and transportation dropped by 3.2%, 0.5% and 0.1%, respectively.
The monthly inflation reportedly stood at negative 0.3% in Georgia in December compared to the previous month.
According to Geostat, the main reason for this monthly deflation is a drop in food, beverage and transportation prices.
The National Bank of Georgia (NBG) said on December 19 that annual inflation in 2013 would remain below the target of 6%.
"The preliminary economic activity indicators point at a weakening of the demand in November, pushing the price level down," NBG said. "Despite high levels of liquidity and capital in the banking sector, credit activity is still modest, due to low demand for loans."
NBG cited "low growth rate" of foreign remittances as one of the reasons causing the weakening of the demand. $110.5 million was transferred from abroad into Georgia in November.
Meanwhile, the International Monetary Fund (IMF) Mission Chief for Georgia, Mark Griffiths, issued a press statement in December saying macroeconomic developments have been generally positive this year.
"Growth has been strong, while inflation has fallen sharply. While there are some signs that growth may have eased recently, reflecting lower growth in trading partners, some slowdown in foreign direct investment, and recent uncertainties associated with the elections and the political transition, the economy is expected to expand by 7 percent in 2012," Griffiths' statement says.
The statement said that for 2013, the mission projects that GDP growth could reach 6 percent. Inflation has remained very low in 2012 due to the earlier nominal appreciation of the lari against currencies of Georgia's main trading partners, and declines in food prices over the last 12 months.
"As the impact of these temporary factors wears off, the mission projects that inflation will increase from -0.5 percent in November to 4 percent by end-2013, and gradually move toward the medium term inflation objective of the NBG," the statement said.
According to the IMF mission, the monetary policy stance, including the recent cut in official interest rates, is broadly appropriate and consistent with the projected rise in inflation.
"The fiscal deficit is projected to decline to 2.8 percent of GDP in 2013. This will facilitate external adjustment and create room for countercyclical fiscal policy. This is consistent with the medium-term strategy to bring the deficit down to about 1½ percent of GDP by 2016 and should keep Georgia's government's debt-to-GDP ratio on a firm downward path," the statement says.