Koba Gvenetadze: High inflation is a recent significant challenge for Georgia as well as for other developing and developed countries

High inflation is a recent significant challenge for Georgia as well as for other developing and developed countries, Koba Gvenetadze, President of the National Bank of Georgia, stated about it at the sitting of the Parliament on the draft of the main directions of monetary and foreign exchange policy for 2022-2024.

According to him, due to the globally prolonged pandemic, the world met 2021 with such exogenous factors: it was a significant increase in prices of agricultural products and oil in international markets, the breakdown of global supply chains, the sharp rise in international shipping prices, the shutdown of the economy, the lockdowns and the increase in costs per unit product of enterprises as a result of Covid-19.

"Against the background of all this, it would be practically impossible to keep inflation close to its target. That is why in 2021 inflation will be significantly higher than the target in most countries, including developed countries such as the US (6.8% - maximum in around 40 years) and Germany (according to preliminary data - 5.2% - the maximum of the last 29 years). This situation makes the inflation target an even more important indicator of the medium-term period to which current inflation should move. In particular, the inflation target is a nominal barrier for the economy - it protects us from the fact that after shocks, inflation will return to its long-term optimal level, which we set as a target. By setting a high inflation target during high inflation, we would practically deny the existence of an inflation target. Keeping the inflation target low will make it clear for the market that the National Bank will pursue a tough policy until inflation continues to decline. This will be a guarantee that the inflation caused by exogenous factors will not turn into permanent inflation and will be temporary, "- said Koba Gvenetadze.