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Georgia inflation rate: Price rises ease as food costs stabilise but housing shortage amid Russian immigration boom keeps rate high

By Nicole Willing

Edited by Georgy Istigechev

21:31, 18 November 2022

Georgian lari banknotes.
Georgia’s central bank has kept its key interest rate at 11% as inflation appears to have peaked – Photo: Prachaya Roekdeethaweesab /

The National Bank of Georgia has maintained its key interest rate at 11%, as inflation appears to have peaked but remains relatively high driven by a Russian immigration boom.

Georgia’s economy boasts one of the highest growth rates in the world as many countries head for a recession, and it has one of the few emerging markets currencies – the lari (GEL) – to be gaining value against a strong US dollar.

What is the outlook for the inflation rate in Georgia heading into 2023?

In this article, we look at inflation rate drivers and some of the latest Georgia inflation predictions.

How does Georgia measure inflation?

What is inflation? A country’s rate of inflation refers to the rate at which prices for goods and services rise over time, eroding consumers’ purchasing power. In most countries, central banks set inflation targets to maintain price stability.

Inflation rises when demand from consumers and businesses exceeds supply, driving up the prices that suppliers charge for goods and services. Higher costs for inputs such as commodities and components can also cause inflation, as suppliers charge customers higher prices to cover those costs. Currency exchange rates have an impact, as they affect how much money a country pays to import goods and how much it receives from exports.

How is inflation measured? National statistics offices calculate inflation by comparing the value of a basket of goods and services in a price index with the value of the index in past months and years. 

There are different types of inflation index, such as a consumer price index (CPI), retail price index (RPI), personal consumption expenditure (PCE), or producer price index (PPI).

Headline inflation refers to the overall data, while core inflation excludes volatile prices such as food and energy.

Inflation data helps inform a country’s monetary and fiscal policy and provides information to the public. In Georgia, inflation rate data is collected and published by the National Statistics Office of Georgia. 

Georgia’s core inflation is calculated by excluding food and non-alcoholic beverages, energy, regulated tariffs, and specific transport tariffs from the consumer basket. The statistics office also calculates core inflation without tobacco.

Russia-Ukraine fallout drives Georgia inflation

According to Georgia's inflation rate history from economic data provider TradingEconomics, the country’s inflation rate has averaged 7.34% since 1996, falling from an all-time high of 59.31% in April 1996 to a record low of -3.30% in May 2012 before gradually trending higher.

The Georgia inflation rate soared in 2021, from a year-on-year rate of 2.4% in late 2020 to 13.9% at the end of 2021, as currency depreciation and a rebound in commodity prices from the Covid-19 lows raised the cost of imports.

Annual inflation rate in GeorgiaSource: National Statistics Office of Georgia

Inflation in 2022 eased to 11.8% in March, then moved back up to 13.3% in May as the Russia-Ukraine conflict drove prices higher. But the rate has since been trending lower, coming in at 10.6% for October.

The National Bank of Georgia raised its benchmark interest rate by 50 basis points to 11% in March – its highest level since the 2008 financial crisis, having raised the rate by 50 points in December 2021.

The bank has since maintained the rate at 11%, as it expects the inflation rate has peaked and will remain relatively high until it begins to decline in 2023.

The trend in the Georgia inflation rate has been influenced by the Russia-Ukraine war, with more than 112,000 Russians – many of them tech professionals – entering the country since the invasion began in March. That has resulted in soaring capital inflows, as more than $10bn entered Georgia from Russia in April-September. While many emerging markets have sold down their foreign currency reserves in an attempt to protect their currencies from the impact of a strong US dollar and capital flight in response to geopolitical uncertainty, the surge in inflows has lifted Georgia’s foreign currency reserves. 


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The US dollar to Georgian lari exchange rate spiked from 3.09 at the start of this year to 3.40 in March in an initial response to the invasion of Ukraine, but has since been in a downward trend and was trading around 2.72 as of 18 November 2022.

The lari has also strengthened against the euro, offsetting some of the imported price inflation from high energy and food prices. However, a strong currency weighs on export demand and values.

The arrival of more than 100,000 immigrants into a country of 3.7 million has caused a housing crisis and contributed to higher consumer prices. it has also driven an economic boom, defying expectations of analysts that had expected the war to weigh on Georgia’s economy.

The World Bank revised down its gross domestic product (GDP) forecast for Georgia from 5.5% to 2.5% in April, but the economy is on track to expand by more than 10% this year.

On 7 November, the International Monetary Fund (IMF) reached a staff-level agreement with Georgia to provide around $38mn in financing.

“The Georgian economy has performed strongly in 2022 as adverse spillovers from the war in Ukraine thus far have generally been less impactful than expected earlier. Buoyant tourism revenues, a surge in immigration and financial inflows triggered by the war, and a rise in transit trade through Georgia come on the heels of a robust recovery from the pandemic and have lifted growth and fiscal revenues, strengthened the current account balance and the lari, and supported accumulation of foreign currency reserves,” the IMF stated"

“Credit growth has slowed, but inflation remains elevated reflecting still high commodity prices and strong domestic demand. Quick and appropriate NBG action has helped limit the impact of the war on the financial sector, including by requiring banks to adhere to relevant sanctions.”

Following its latest Monetary Policy Committee (MPC) meeting on 26 October, the National Bank of Georgia said:

“The Russia-Ukraine war and the accompanying sanctions imposed on Russia have significantly increased migration flows into Georgia, boosting demand. The average real GDP growth in the first eight months of 2022 stood at 10.3 percent. Accordingly, the forecast for the economic growth in 2022 has been revised upward to 10 percent.

The average annual level of economic activity in 2022 is expected to exceed its potential level. As a result, demand-driven inflationary risks have increased, although this is partly offset by the strengthening of the GEL exchange rate as a result of foreign exchange inflows.”

Monetary policy tightening from the European Central Bank (ECB) and US Federal Reserve (Fed) are expected to have an additional policy tightening effect on foreign currency loans in Georgia. And with the country’s fiscal deficit shrinking, demand-side inflationary pressure is expected to be neutralised, contributing to a decline in inflation, the bank stated.

What will the Georgia inflation rate in 2023 look like? How low can it fall?

Georgia inflation rate outlook

The National Bank of Georgia forecasts that inflation will remain high until the fourth quarter 2023, when it will return to the 3% range. The rate could drop to around 2.96% by the fourth quarter of 2024 and remain around 3% in 2025.

“Other things equal, inflation will remain high until the end of the year, but will continue to gradually decline and will approach the target level in the second half of 2023. Taking into account the existing inflationary risks, tight monetary policy will be maintained and its normalization will gradually begin only after a clear trend of decreasing inflation will be observed. On the other hand, if inflation expectations rise and/or additional demand-side price pressures emerge, further tightening of policy or maintaining the current tight stance for a longer time period might be necessary,” the bank stated.

The next MPC meeting will be held on 21 December 2022, when it will decide on whether to maintain or adjust interest rates.

Georgia inflation forecastSource: National Bank on Georgia

The IMF also expects Georgia’s expected inflation rate to fall by 2024:

"Growth is now projected at 10 percent in 2022, while annual inflation is forecast to close the year at 10½ percent. Growth and inflation are expected to slow in 2023, on the back of moderating external inflows, deteriorating global economic and financial conditions, smaller fiscal deficits, and a sufficiently tight monetary policy stance.

Over the medium term, growth is projected to converge to its potential rate of about 5 percent, supported by infrastructure investments and structural reforms to increase productivity. Inflation is forecast to fall to the NBG’s target level of 3 percent in 2024.”

At the time of writing, the Georgia inflation rate forecast from TradingEconomics projected a slightly higher for longer inflation trend around 6% in 2023 and 4.50% in 2024, based on its econometric models.

If you are looking for a Georgia inflation forecast to inform your trading decisions, keep in mind that economic and geopolitical forecasts can result in real rates diverging from forecasts.

We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinions before making any investment decision.

Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.


What is the current inflation rate in Georgia?

Georgia’s annual inflation rate was 10.6% in October, down from 11.5% in September and a peak of 13.9% in December 2021.

Has inflation been going up or down in Georgia?

While it remains relatively high, inflation in Georgia has been declining since May 2022.

Why is inflation so high right now?

Inflation has jumped since 2021 on a combination of high commodity prices, strong economic growth, and rising demand from immigrants into Georgia from Russia since the Russian invasion of Ukraine.

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