Tackling inflation in Georgia

The Adviser in Economic Issues to the National Bank of Georgia’s President Giorgi Bakradze conducted a seminar for ISET students and alumni on inflation targeting at the International School of Economics at Tbilisi State University on June 2.

Giorgi Bakradze talked about the National Bank’s inflation policy, the main causes that impact inflation, and the internationally accepted means of fighting against inflation. Inflation targeting is one of the recently adopted methods of controlling inflation, which has been implemented by the National Bank.

“The desired result cannot be achieved immediately and time is needed to achieve the efficient outcome of currently implementing inflation targeting policy. Indeed, even the economically self-sustainable countries cannot achieve inflation targeting precisely, it can be a bit higher or a bit lower but not precisely as was planned. However, this is one of the most effective methods the industrial countries apply”, stated Bakradze.

He also talked about the role of the Ministry of Finance in controlling inflation. “The NB’s and MOF’s policies are frequently contradictive; however, CB implements an independent policy”.

According to Bakradze the main causes of inflation is steadily increasing prices for food and energy resources on international marker. Being a small country, Georgia has no other way but to accept a price bid by the supplier countries. Speaking to the Messenger, Giorgi Bakradze also admitted that the absence of antimonopoly regulations in Georgia is also attributable to inflation. “The majority of economically developed countries have antimonopoly regulations, and I also think that a conformable organ agency is necessary for Georgia.

Yet, he emphasized the recently increased credibility of Central Bank, the achievement of which he attributed to the independent and transparent policy of the NB. “The Central Bank is more reliable now due to its consistent policy, which raised the credibility among people. The devaluation of Georgian Lari, which happened at the end of 2010, triggered less market resonance than was seen in 2008."