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According to data from the last two weeks of April, retail food prices are down 4.6% y/y (compared to April 2015) and 0.6% m/m (compared to March 2016). During these two weeks, we have seen the biggest drops in the prices of eggplants (21.4%), buckwheat (9.4%) and tomato (9.0%). Only one (!) product increased in price during this period: greens (up 3.8%).

Georgian Consumers Will Celebrate All the Way to the Easter Table

Traditional Georgian households have been fasting the last few weeks, which implied reduced consumption of sugar, eggs, dairy products, fish, and meat. Lower demand may have been a factor in keeping food prices at bay, however, the downward trend in prices started more than a month before the Great Lent, in February 2016. This trend has little to do with Georgian religious traditions. Rather, it is best explained by the resetting of Georgia’s economic relations with Iran, on the one hand, and its role as a temporary buffer for Russia-banned Turkish products, on the other.

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Retail food prices decreased by 1.3% y/y and 0.2% m/m. Compared to the end of March, the biggest drops in prices happened in the vegetables category: eggplants are down by 11.8%; cucumbers by 11.2%; and cabbage by 5.3%.
The biggest increases were recorded for wheat flour (added 9.3%), garlic (9.0%) and tea (7.7%.)

Of note is the rapid convergence in prices among competing retail chains. The most expensive and the cheapest chains are no longer as far apart from each other as they used to be just a few months ago. The gap between the max and min values of the Food Prices Index has shrunk from 13 index points on January 15, 2016 to only 6.5 index points on April 15, 2016. The good news is that prices converge downwards. In other words, the more expensive chains face tough competition and are forced to cut prices.

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Retail food prices show a 2.5% decrease y-o-y and a 2.3% decrease from the previous month. Compared to February, onions, coffee and potatoes experienced the biggest drops showing 8.3%, 7.1% and 7.0% decreases in prices, respectively.
While the majority of foods lost value, the price of tangerines increased by 8.2%; the pork price increased by 4.6% and fresh chicken meat became 4.1% more expensive. The price of domestically produced milk also increased by 4.2%, whereas imported brands became 5.2% cheaper on average (in March compared to February).

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Georgian Consumers Emerge Victorious From The Russian-Turkish Spat

The Russian ban on Turkish goods turns out to be a boon for Georgian consumers. As Turkey is shifting its surpluses to the Georgian market, the prices of fruits and veggies are plummeting.

At the same time, given that some of the imported goods are substituting for local equivalents (e.g. the tasty “Dighmis” tomatoes), the fact that Turkish businesses are able to dump their products in Georgia is no fun for domestic producers, particularly those among them who have recently borrowed (in hard currency) in order to invest in modern greenhouse technologies. To the extent that Georgian market remains unprotected, the most vulnerable among these producers may simply go out of business.

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