Georgia's central bank cut its benchmark refinancing rate by 50 basis points to 4.75 percent as inflation is forecast to below the bank's 6 percent target in the second half of 2013.
The National Bank of Georgia, which cut rates by 150 basis points in 2012, said preliminary data showed that economic activity slowed in the fourth quarter, indicates a decline in prices.
Lending activity remains low, due to low demand which is expected to weaken further, the central bank said.
Inflation in Georgia has been negative for the last six of eight months, with prices down 1.6 percent in January, following December's fall of 1.4 percent, due to lower food prices.
Georgia's Gross Domestic Product rose by an annual 2.5 percent in the fourth quarter of 2012, down from 7.3 percent in the third quarter.