The ISET Policy Institute continues to update Georgian society about the current macroeconomic developments in the country. The highlights of its Macroeconomic Monthly Review of the Georgian Economy, January 2013 are as follows:

• According to GeoStat, year on year (y-o-y) economic growth in Georgia was 2.3% in January. Based on currently available information, ISET Policy Institute’s growth forecast was downgraded from 5.4% to 2.5% for the 1st quarter of 2013.
• Consumer confidence (and both its components – the present situation index and the expectations index) continues to grow. Over the short history of the Consumer Confidence Index (CCI), the present situation index has never been so high. The expectations index is insignificantly negative (-0.1%). Both of these have contributed to the fact that the overall CCI is only 0.1% lower than its peak in November 2012. We expect that such a positive trend in consumers’ attitudes will positively influence the economic development of Georgia.
• Prices are relatively stable. Both the Khachapuri and Consumer Price Indices (CPI) have increased by 3% on the monthly basis.However, we have witnessed y-o-y deflation (CPI inflation at -1.6%) in the country. Several price deflation determinants include deflationary expectations, the declaration about forming an anti-trust agency and a further decline of world prices.
• Deposits have increased by 4% compared to December. This could potentially be driven by deflation, increased public confidence towards the banking sector, or the interest rate differential.
• Budget revenues have decreased on both y-o-y and a monthly basis, potentially pointing either to the slowdown of economic activity or to a declining market concentration. As for budget expenditures, a y-o-y growth of 15% was observed.
• Georgia continues to be an import-dependent economy, with a substantial dependence on world prices. In January, exports grew by 25%, but imports declined by 6% in y-o-y terms. Depreciation of the GEL could have contributed to such a development.
• World prices are stable, with food prices declining further and oil prices slightly rising (3.8%)

Overall, we expect the economic activity of Georgia to be moderate and predict 1st quarter growth to be 2.5%.

The ISET Policy Institute will publish its next report about the economic trends of February 2013 in mid-April.