Milder Monetary Policy To Woo Banks
26 January, 2012
Milder Monetary Policy To Woo Banks

Central Bank of Georgia goes ahead with milder monetary policy but no increase in economic activity ensues as a result. Only banks that can have loans for lower interest rate at Georgian Central Bank seem to take benefits.  

 

The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on January 18, 2012 to lower its Main Policy Rate (the refinancing rate) by 25 basis points to 6.5 percent. The NBG makes the refinancing rate milder by 25

basis points almost each month starting the July of 2011 cutting the rate from 8% fixed during the first half of 2011 to 6.5% ultimately.

Based in the NBG data, the annual inflation remained low in December of 2011, at 1.9%. Core inflation (net of food and energy) is still low as well amounting to 0.4%. According to the existing forecasts, inflation is expected to remain low in the first half of the year but this trend is expected to be changed starting summer although the inflation rate will remain below the target [6%], the NBG believes.

The trade deficit keeps increasing in the recent period, mostly due to the increase in imports.

According to the NBG, the expected decline in the economic activity of EU countries is supposed to have a negative impact on the trade balance of Georgia, which will possibly result in additional weakening of the aggregate demand in the country.

“Existing forecasts indicate that given the unchanged policy stance, the inflation rate will remain below the target. Hence the MPC of the NBG considered it appropriate to continue easing the monetary policy and decided to decrease the refinancing rate by 25 basis points. The NBG considers that at present the recent monetary easing will be sufficient to keep the inflation in the medium term at the target level,” the NBG statement reads.

However the existing price hike on food and primary goods make some experts as well as consumer to question official statistics as well as the ease of monetary policy. Some economic analysts think the underway milder monetary policy is not pertinent against the backdrop of the parliamentary elections 2012 in prospect and impending global economic crisis when the EU and the US have to handle with default risks.

Ditrikh Muller, a financial analyst with the Georgian Investment Group, thinks this elections  must be an unprecedented expensive  for Bidzina Ivanishvili, Georgian tycoon with up to USD 6 billion in pocket, founded an oppositionist political party and plans to participate in the elections.

“Food prices increased by around 20% compared to the past year our everyday expenses show and how can the inflation rate stand at 2%?” Muller wonders. “If milder monetary policy is a reasonable move grounded on economic factors it should be resulted in decreased interest rates and increased economic activity, but I see no token of it.”

Nodar Khaduri, an economic analyst, does not have big trust in official statistics either and see no lower interest rates or more vivid economic activity but he believes that the annual inflation rate really decreased to 2% much below the targeted 6%. But consumers cannot feel this relief as far as they compare prices with the 2009 when they were much lower.

But too low inflation rate may cut down the GDP and revenue figures lower in 2012 for the state budget 2012 is planned on 6% of inflation.

“Therefore the NBG eases policy rate to keep inflation in line with this year’s target figure, and that’s right.  Otherwise the macroeconomic data of GDP and revenues will decrease,” he elaborated.”Banks do not cut down interest rates as far as they observe the long-term trends. They reduce rates only if they believe that the inflation rate will go down in longer prospect.”

That seems scarcely possible as all international forecast as well as the NBG expects inflation pressure get tighter starting summer.

On the other hand the recent TV ad-rolls of banks touting deposits at special [higher] interest rates makes one presume that interest rates on credits are not supposed to decrease. Muller supposes that banks are the single commercial bodies that enjoy the lowered policy rate for they take loans under lower rates at the NBG.

“This milder monetary policy seems like a pre-election move to woo banks alone in order get bigger financing for the pre-election campaign, this will be incomparably expensive elections you know for Ivanishvili participates in its and promise not to spare finances and the ruling power needs much bigger resources than it needed for any other elections before,” Muller said.

 

Print
Other Stories
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
10 Reasons to buy an apartment in the suburbs
There is a tendency for Tbilisi dwellers to move from central parts of the capital to the suburbs.
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
PHOTO OF THE DAY
GEL Exchange Rate
Convertor
20.04.2019
21.04.2019
USD
1
USD
2.6935
2.6935
EUR
1
EUR
3.0291
3.0291
GBP
1
GBP
3.5021
3.5021
RUB
100
RUB
4.2126
4.2126
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
2.6935
EUR
1
EUR
3.0291
GBP
1
GBP
3.5021
RUB
100
RUB
4.2126
April 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