Wednesday, February 12, 2014

Georgia raises rate 25 bps on improving economy

    Georgia's central bank raised its benchmark refinancing rate by 25 basis points to 4.0 percent, saying there was no need to maintain the easy policy stance as economic growth is improving and this trend is expected to continue in the first half of 2014.
    The National Bank of Georgia, which cut rates by 150 basis points in 2013, also said inflation was projected to get closer to the bank's target in the second half of the year.
    The central bank, which targets inflation of 6.0 percent end-2014, said in December that it was maintaining a relaxed policy stance but would tighten policy to ensure inflation remains on target.
     In January Georgia's inflation rate jumped to 2.9 percent, the fourth month of rising prices after deflation in most of 2012 and 2013.
    The impact of last year's depreciation of Georgia's lari was estimated to have raised the inflation rate by about 1 percentage point, an impact the central bank said was contained in its forecast.
    The lari depreciated by 4.6 percent against the U.S. dollar last year and fell further to 1.79 to the dollar at the end of January. But it has risen in recent weeks, trading at 1.73 today.

    Georgia's economic growth is estimated to have picked up to 8 percent in the November-December period and the central bank said it was forecasting 6.9 percent growth in the fourth quarter along with a 3.1 percent expansion for the entire 2013 year.
    In 2012 Georgia's GDP grew by 6.1 percent but the International Monetary Fund forecast 2.5 percent expansion in 2013. In the third quarter, Georgia's GDP grew by an annual 1.4 percent.
   The central bank said domestic demand was boosting imports, especially of investment goods that should encourage overall economic growth. Banks' lending activity has increase significantly in recent months, with banks' credit portfolio up by 16 percent.


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