Georgia uses key rate against inflation

Georgia uses key rate against inflation

The National Bank of Georgia increased its key policy rate from 5% to 5.5% and predicted further gradual tightening of the monetary policy in the course of this year. "The monetary policy decision is based on the macroeconomic forecast, which shows an increase in inflationary expectations, as well as in the domestic and external risks affecting the inflation forecast," the controller said.

The editor-in-chief of the Ekonimika Gruzii magazine, Emzar Dzhgerenaya,  told Vestnik Kavkaza that the only factor to prompt the National Bank to raise its key interest rate and announce its increase to the end of the year, is the increase of the inflation rate in the country. "Right now in Georgia the price of fuel and cigarettes have significantly increased. As a result, the threat of inflation also increased, and the National Bank believes that in this way, raising the key rate, it is protecting the country from inflationary risks," he explained.

According to him, the Georgian business has nothing to worry about because of its specific features, in contrast to Russia, where the growth of the key rate will adversely affect the lending business. "The volume of borrowing in business is very small in Georgia, and business loans occupy a very small proportion in the structure of bank credits. So we won't have a situation like in the developed countries in the West, where money is getting more expensive, and business at the same time is reducing," he said, noting that the National Bank can confidently raise its key rate to defend the country against inflation, without fear of a negative impact on the economy.

The head of the Institute of Management Strategy, Petre Mamradze, in turn, drew attention to the very large trade deficit of Georgia. "Unfortunately, the new government has failed to make significant changes to the fact that the deficit is about $6 billion, it is a very high figure for a small republic, which shows that imports exceeded exports by 3-4 times. So while there are monopolies and no investment, people keep the money and don't spend it. And now the authorities are looking for ways to somehow stimulate the banks and the population, now they have to think about what the key rate should be and how to defend themselves against those events that are taking place in Georgia and the whole world," he said.

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