Inflation was 2.8% y/y and 1.1% m/m in January 2021
Annual CPI inflation came in at 2.8% in January 2021, after 2.4% inflation in December 2020, according to Geostat. The reduction of inflation over the last two months is related to the government subsidy of utility bills and is temporary. Core inflation (non-food, non-energy) was 5.8% in January, while core inflation excluding tobacco was 5.7%. By categories, annual inflation was mainly driven by price changes in food and non-alcoholic beverages (+6.4% y/y, +2.06ppts), health (+9.7% y/y, +0.76ppts), furnishings, household equipment and maintenance (+10.8% y/y, +0.61ppts), alcoholic beverages and tobacco (+6.9% y/y, +0.45ppts) and housing, water, electricity, gas and other fuels (-20.5% y/y, -1.77ppts) categories. On a monthly basis, there was 1.1% inflation in January 2021, reflecting price increase in food and non-alcoholic beverages (+2.0% m/m), transport (+1.4% m/m) and housing, water, electricity, gas and other fuels (+1.9% m/m).
International reserves at US$ 4.1bn in January 2021
Gross international reserves increased by 17.8% y/y to US$ 4.1bn in January 2021 according to NBG. On a monthly basis, the reserves were up by 4.9% (+US$ 191.0mn). Changes in reserves were attributed to the disbursement of donor funds and FX sales totaling US$ 80.0mn by NBG in January 2021.
NBG keeps its policy rate unchanged at 8.0%
At its meeting on 3 February 2021, NBG’s monetary policy committee decided to keep its policy rate at 8.0%, unchanged since August 2020. Annual inflation was 2.8% in January 2021 and NBG commented that reduced inflation rate in last two months is temporary, related to government’s utility subsidies. According to the current forecast, NBG expects annual inflation at around 4.0% on average in 2021, and then gradual approach to the target rate of 3.0%. The regulator commented that significant increase in world commodity prices, COVID-19 pandemic-related rising production costs and GEL depreciation are key factors pressuring inflation upward. With still high uncertainty, the committee said the need for maintaining a tight monetary stance is appropriate, and the likelihood of a rate increase is not ruled out also. NBG expects a gradual recovery of economic activity in 2021 and growth at 4%, with domestic demand being the main driver. The next committee meeting is scheduled for 17 March 2021.
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