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Georgia’s annual inflation 2.4 %

By Gvantsa Gabekhadze
Tuesday, January 7
In December 2013, the annual inflation rate in Georgia equaled 2.4 percent. The data was released by the National Statistics Office of Georgia (GEOSTAT) on January 3. The office published the list of those products that increased in price. The minister of finance and the chair of the National Bank of Georgia do not see the figure as alarming. However, certain analysts have different views over the figures.

Prices for food and non-alcoholic beverages increased by 5.7 percent, contributing 1.75 percentage points to the overall index. The prices mainly increased for the subgroups of vegetables (44.0 percent), milk, cheese and eggs (3.0 percent). The prices were down for the subgroups of fruits and grapes (-7.3 percent) and oils and fats (-4.0 percent).

Alcoholic beverages and tobacco: the prices in this group increased by 8.1 percent contributing 0.43 percentage points to the overall index. The highest price increases were recorded for the subgroup of tobacco (13.6 percent).

Transport: prices declined 1.7 percent, reflecting a negative impact of -0.22 percentage points to the overall index. The most notable price decreases were recorded for the subgroups of the purchase of vehicles (-7.4 percent) and the operation of personal transport equipment (-1.9 percent).

Head of the National Bank of Georgia, Giorgi Kadagidze, claims that the figures are absolutely natural and appropriate to the celebration period.

“Our major aim is not to allow there to be a negative reflection of the inflation on economic growth. If the process of inflation becomes intense, we will launch the necessary measures,” Kadagidze stressed.

Minister of Finance Nodar Khaduri emphasizes that there is nothing special concerning the Lari rate, and states that the National Bank of Georgia has “appropriate reserves”.

Economic analyst Demur Giorkhelidze does not share these aspirations and states that the current situation concerning the Lari is alarming. He stresses that the condition of the national currency depends on the coordinative action of the government and the National Bank.

“We had and have a great problem. The Lari rate has been inappropriately high. There will be no economic growth in the country when we have artificially expensive currency…the money which is in the country is concentrated by banks for their own aims. The government does not pay the problem much attention, when there should be a competitive environment in the banking system. Banks have such legislation that they finance themselves and are the main deterrents to economic development. When we have a bank system like this, we will not have any positive moves in the economy,” Giorkhelidze states.

The analyst stresses that for overcoming the problems, Georgia needs economic growth and jobs.

“If people are not active and do not work, we will have a serious problem. The government should create an environment where people are launching independent activities. The whole developed world supports such process in their countries,” the analyst states.