During an interview with BMG, economist Akaki Tsomaia warned that Georgia’s ongoing political crisis could lead to a major economic downturn and potentially result in rising inflation. As a consequence, he said, the National Bank of Georgia (NBG) will have a hard time stabilizing prices and encouraging economic growth.
“I have no questions about the independence of the National Bank. It is not really an independent institution today. The NBG is one of the offices, along with other former institutions, that existed in Georgia and serves one person – an informal governor. Accordingly, somewhere ‘there’ they will decide whether to choose inflation or economic growth, and the National Bank will act accordingly,” Tsomaia stated during the interview.
Despite these concerns, Tsomaia emphasized that the NBG’s decision to keep the monetary policy rate at 8% was reasonable and, as a result, the inflation remains under control, with the bank having the option to keep the current rate or consider a slight tightening of policy. However, he alerted the interviewer by saying that the worsening political situation could present more difficult economic decisions in the future.