Milder Monetary Pressure for Stronger Pre-Election Financing
11 November, 2011
Milder Monetary Pressure for Stronger Pre-Election Financing

Easing the monetary policy rate against the backdrop of continuing price hike serves to secure stronger banking financing in the upcoming pre-election period, some experts suspect. 

“The underway lowering of monetary policy rate by the National Bank of Georgia (NBG) when prices on everything go higher and higher has no economic ground and poses inflation risks. Very likely it woos banks in order to secure funding for the election campaign of the ruling power in the upcoming parliamentary election of 2012”,

 Ditrikh Muller, an economic analyst with the Georgian Investment Group, said.

Georgian central bank lowered its monetary policy rate by 25 basis points on October 26, 2011 as inflation pressures eased to 4.6% - much below the annual target standing at 6% this year.

“As expected, the decreasing trend of inflation continued in September as well. Annual inflation stands at 4.6% as of September and core inflations remain low. Specifically, core inflation (net of food and energy) amounts to 0.5 percent,” The NBG reported.

It expects the inflation to remain low till the end of the year and decrease further at the beginning of 2012.

The International Monetary Fund local office agrees with the NBG that inflation shows reducing trends and expects its rate to be at 7% by the end-year.

Georgian experts appear skeptical toward the official statistics as the everyday transportation or shopping costs bespeak of price hike but nobody has an authentic alternative tool to double-check official statistics.

“The official statistics body of Georgia based on which the NBG makes its forecasts is the only source that can calculate inflation rate, there is no alternative mechanism to double-check these figures however you see yourself where prices stand, ” Nodar Khaduri, an economic analyst, told Georgian Journal however eluded further elaboration of inflation rate.

“Since the NBG lowered policy rate very likely they have grounds for that, central bank has the more comprehensive economic data than anybody else,” Khaduri said.

Irakli Lekvinadze, an economic analyst, agrees that prices on substantial product like food and clothes are permanently increasing  but the consumer basked based on which consumer price index is calculated (CPI) consists of 266 products and prices on some products may really slump so significantly that offset price hike on key consumer products.

“Besides economic activity is supposed to revive since credits become cheaper,” he said.

The NBG has already reduced policy rate for the third time starting this summer [from 8 percentage point 7.25 already] but credits did not get cheaper and no economic activity revived in fact, Muller counters.

“Only banks enjoy lower monetary policy rate now in order to provide government by stronger financing in the upcoming pre-election campaign as they face serious competitor now,” he said.

The ruling power spent about GEL 500 million during the previous elections and now it needs much more, perhaps billion, to compete the billionaire Bidzina Ivanishvili, who came out with political ambitions recently and promised not to spare money to win elections.

Muller believes the inflation pressure did wane as significantly as reported neither now nor in summer when the NBG started easing policy rate first time this year in July as soon as the inflation pressure eased from the May’s 14.3% to 10% in June.

The NBG backed its milder monetary policy in July by 4% drop in consumer prices caused by the downwardly going oil and wheat price tendencies at international market as well as by seasonal effect thanks to which prices on fruit and vegetables reduced in summer.

However almost doubled transportation and communal expenses making about 10-15% of household incomes could not be offset by this 4% drop, experts think.

And now when the seasonal effect goes away and fruit and vegetables along other product also are gaining prices up especially before New Year when demand and expenses increase traditionally Davit Narmania, Board Chairman of the Economic Problems Research Center, sees no prospects for easing inflation pressure.

Muller worries that ungrounded milder monetary policy may further fuel inflation.

“Economy should not be a victim of politics” he said.

Print
Other Stories
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
Investment Plan for Europe – Additional EUR 800 million for SMEs as EIF and ProCredit double support for innovative companies
The European Investment Fund (EIF) and ProCredit Group are providing an additional EUR 800 million to innovative small and medium-sized companies (SMEs),
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
PHOTO OF THE DAY
GEL Exchange Rate
Convertor
22.07.2019
23.07.2019
USD
1
USD
2.8845
2.8845
EUR
1
EUR
3.2410
3.2410
GBP
1
GBP
3.6177
3.6177
RUB
100
RUB
4.5787
4.5787
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.8845
EUR
1
EUR
3.2410
GBP
1
GBP
3.6177
RUB
100
RUB
4.5787
July 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31