Georgia’s inflation picks up to 12.8% y/y, driven by food prices

Georgia’s inflation picks up to 12.8% y/y, driven by food prices
By Iulian Ernst in Bucharest November 4, 2021

Consumer prices in Georgia rose by 1.3% in October, while the annual inflation rate accelerated from 12.3% y/y in September to 12.8% y/y, the statistics office Geostat announced.

Core inflation remained steady from September at 6.3% y/y, while core inflation without tobacco edged down slightly to 6.2% y/y (from 6.3% y/y in September).

The food prices increased by 3.0% in October, contributing 0.96pp to the month’s 1.3% inflation. The prices were higher for vegetables (9.0% ), bread and cereals (5.5%), fish (4.2%), milk, cheese and eggs (3.6%), sugar, jam, honey, chocolate and confectionery (1.2%). Along with this, prices decreased for fruit and grapes (-1.1%);

The 9.2% monthly rise in the average price of clothes contributed another 0.29pp to the 1.3% monthly inflation in October.

As regards annual inflation (12.8% y/y), the category of food goods made the biggest contribution as well: 5.73pp, caused by the 18.4% annual increase of their prices.

The category of transport items (including fuels) contributed another 2.40pp, as prices surged by 19.6%.

The prices of housing, water, electricity, gas and other fuels rose by 11.9% y/y, contributing 1.75pp to annual inflation.

The National Bank of Georgia (NBG) on October 27 kept its key refinancing rate unchanged at 10% for a second time in a row, after raising it by 0.5% to its highest level in 13 years in August.

The central bank stressed that it is keeping the monetary policy stance tight, as increased inflation remains a challenge for Georgia. Noting that consumer prices increased by 12.3% y/y in September, the NBG said it expected inflation to remain high through February 2022.

According to the central bank, the high inflation was mainly a result of one-off factors, such as significant increases in prices of food and oil on international markets. The NBG said the upward pressure on prices was also driven by the rapid growth of international transportation costs.