Inflation rate at 5.6% y/y and 0.9% m/m in January 2016
Annual CPI inflation rate was recorded at 5.6% in January 2016, up from 4.9% in the previous month, according to GeoStat. Overall prices changes were driven by price increases in food and non-alcoholic beverages (+5.1% y/y, +1.61ppts), health (+11.0% y/y, +1.04ppts), and housing, water, electricity, gas and other fuels (+8.4% y/y, +0.71ppts). Meanwhile, prices in the transport category decreased (-1.6% y/y, -0.20ppts) due to lower prices on fuel.
On a monthly basis, inflation rate was at 0.9% in January 2016. Price increases in food and non-alcoholic beverages (+2.6% m/m, +0.80ppts) and health (+1.3% m/m, +0.14ppts) and price decreases in the transport category (-1.2% m/m, -0.14ppts) were the major drivers of the monthly price dynamics.
International arrivals up 4.4% y/y in January 2016
Tourist arrivals posted another growth of 4.4% y/y to 0.32mn persons in January 2016, according to the Ministry of Internal Affairs. Increased arrivals from Azerbaijan (+16.1% y/y, 33.4% of total), Russia (+10.2% y/y, 13.7% of total), and Ukraine (+8.4% y/y, 2.5% of total) contributed the most to the growth and were more than sufficient to compensate drops from Turkey (-5.6% y/y) and Armenia (-12.4% y/y). Arrivals from the EU increased 11.1% y/y, with a strong upward trend from Germany, Poland, and Italy.
Gross international reserves stood at US$ 2.4bn as of end-Jan 2016
Gross international reserves decreased 2.9% m/m (-US$73.1mn) to US$ 2.4bn as of end-January 2016, according to NBG. On an annual basis, gross reserves fell 6.2% (-US$ 162.6mn). Net foreign assets of NBG stood at US$ 2.2bn (-3.2% m/m and -6.0% y/y). The fall in reserves was attributed to NBG’s FX interventions and/or government FX operations and asset revaluation.
NBG keeps its policy rate unchanged at 8.0%
At its meeting on February 3, 2016, NBG’s monetary policy committee decided to keep the policy rate unchanged at 8.0%. NBG cited that monetary tightening in 2015 resulted in higher interest rates on lari denominated loans and as a result growth of credit portfolio slowed. This will weaken aggregate demand further and put downward pressure on prices, along with the falling world prices of oil and food products. NBG expects that inflation will slightly exceed the target level of 5.0% in the beginning of 2016 and then decline below but close to the target.
NBG also noted that the impact of the external shock on the exchange rate (the major reason driving the increase in inflation expectations) has been exhausted on the back of the adjustment in imports. This enabled the central bank to restrain from additional monetary tightening. The next committee meeting is scheduled for March 9, 2016.
