National Bank of Georgia raises 2026, 2027 inflation forecasts to 5.4%, 3.5%
TBILISI. Oct 22 (Interfax) - The National Bank of Georgia (NBG) has raised its inflation forecasts for 2026-2027 due to ongoing risks of imported inflation and restrictions on oil supplies from the Middle East, the NBG said in its quarterly monetary policy report.
Despite a less inflationary economic growth outlook, a protracted period of global supply shocks is preventing inflation from return to its target level. In the central scenario, short-term inflation dynamics are determined mainly by ongoing constraints on oil supplies from the Middle East until the end of the year, the report says.
In view of these factors, the average annual inflation forecast for 2026 has been raised from 5.2% to 5.4%, and the 2027 forecast to 3.5% from 2.7%. The regulator thinks inflation will begin to slow in the second quarter of next year.
It said that in the short term, local fuel market prices will come under additional pressure from rising transportation and insurance costs, as well as high refining margins. This will impact prices for various goods and services through production and transportation costs.
Inflation risks are also compounded by rising international food prices. A protracted crisis in the Middle East could result in higher food production and processing costs as energy prices rise. In addition, worsening climate conditions are impacting food prices.
Against a backdrop of a protracted external shock, the National Bank will, in keeping with its cautious approach, will maintain a tight monetary policy for a lengthy period. This will limit the spread of inflationary pressure caused by the supply shock and its reflection in medium- and long-term inflation expectations. As the impact of the shock subsides, this will help inflation return to the 3% target. This risk management approach will ensure inflation stability in the medium term.
The NBG on October 21 again decided to keep its refinancing rate, which it had hiked in early May, at 8.25% per annum.
