The global economic recovery is ongoing, however the COVID-19 pandemic is still causing considerable volatility. Since the beginning of 2021, inflation rates have increased in both advanced and emerging economies, generally driven by pandemic-related supply-demand mismatches and rapidly rising commodity prices, following a global decline in inflation over the course of 2020. According to the latest forecasts, for most countries upward price pressures are expected to subside with a return to pre-pandemic levels by mid-2022. With this in mind, it is pertinent to compare the inflationary trends of Georgia with global patterns.
In Georgia, the year-over-year (YoY) Consumer Price Index (CPI), which measures the average price of goods and services acquired by consumers compared to the reference period, has proved relatively similar to global trends, as in December 2020 the inflation rate showed a significant decline of 4.6 percentage points compared to December 2019, reaching 2.4%, major decrease (25.4 pp) in prices coming from “housing, water, electricity, gas and other fuels” category, which can be explained by the introduction of utility subsidies for households from November 2020 and plummeting global oil prices in the middle of 2020. This figure was still higher than the lowest figure of the reporting period which was recorded in December 2018 (1.5%). Since the beginning of 2021, monthly YoY CPI inflation has been increasing sharply, surpassing pre-pandemic levels, and reaching its peak to date of 12.8% in October 2021 with a 10 pp increase from the beginning of the year.
On the contrary, YoY monthly core inflation increased in the middle of 2020, reaching 6.6% in June 2020 (with significant increases in prices of routine household maintenance, healthcare, and restaurants and hotels) and this has continued to be relatively stable with a monthly average value of 5.8% over the 2020-2021 period, while the pre-pandemic (2017-2019) monthly average was equal to 3.1%. The magnitude of the fluctuations was significantly lower in the case of core inflation compared to CPI inflation, which could be explained by the fact that the most significant price variations have tended to come under the food and energy categories.