On July 30, the Monetary Policy Committee of the National Bank of Georgia (NBG) decided to keep the key refinancing rate unchanged at 8%. The NBG has not adjusted the rate in over a year.
The NBG said annual inflation stood at 4% in June, close to the 3% target. It attributed the “moderate increase” to rising food prices, citing developments in international food markets and the base effect from last year’s low inflation.
The bank said inflation expectations remain stable. It reported that service sector inflation held at 2.3%, below the target, while core inflation also remained below the target. The NBG added that prices for imported products are deflationary, mainly due to lower fuel prices year-over-year. It said inflation in 2025 is expected to “temporarily” exceed the 3% target, averaging around 3.8%.
“Economic activity remains robust,” the NBG said, citing preliminary data showing average growth of 8.8% for the first five months of the year. The bank attributed this performance to “enhanced productive capacity,” which it said “helps mitigate inflationary pressures stemming from excess aggregate demand.” In light of these trends, the NBG revised its 2025 growth forecast upward from 6.7% to 7.4%.
“Global economic uncertainty remains elevated in light of ongoing geopolitical tensions,” the central bank said, adding that this poses a “considerable risk” to inflation. In a high-inflation scenario, it pointed to potential supply chain disruptions from repeated revisions to U.S. tariff policy, which “could significantly exacerbate fragmentation in the global economy.” Combined with heightened tensions in the Middle East, this could contribute to a “stagflationary environment.” Domestically, the bank noted that strong demand also poses inflationary risks that may require a higher interest rate path.
In a low-inflation scenario, the NBG said the economy is undergoing structural changes, with “productivity remaining at a relatively high level.” It also cited the weakening of the U.S. dollar index (DXY) and the rapid normalization of international food commodity prices. These factors, along with a strengthened exchange rate, could “exert downward pressure on headline inflation through lower imported inflation.”
“As a result of macroeconomic analysis and the assessment of existing risks, the Monetary Policy Committee has considered it optimal to adopt a cautious approach toward further normalizing the monetary policy rate, keeping it unchanged at 8%,” the NBG said. It added that the next meeting of the Committee is scheduled for September 10, 2025.
Also Read:
- 29/07/2025 – NBG Replenishes International Reserves as IMF Praises Georgia’s ‘Resilience’
- 21/07/2025 – Georgia’s Foreign Trade Up 12.8% in First Half of 2025
- 18/07/2025 – NBG Denies Seeking SWIFT Alternative After Meeting With Chinese Payment System Head
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