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Inflation Declines – General Price Level Rose by 4.3% in January

In January 2018, as compared to December 2017, inflation level constituted 0.6%, while annual inflation rate made up 4.3%.

In December 2017 the annual inflation rate marked 6.7%,  averaged inflation level (comparison of 12-month averaged indicator with the previous 12-month averaged indicator) made up 6.1%, while National Bank of Georgia (NBG) had forecast the target inflation rate to be 4%. As to the current year, NBG forecasts 3% inflation rate. General price level will be approximate to NEG-determined indicator, the NBG forecasts.

As compared to the previous month, change in prices in the following groups have mainly shaped the inflation indicator:

Prices for food and non-alcoholic beverages increased by 1.7 percent, contributing 0.52 percentage points to the overall CPI change. Prices were higher for the following subgroups: fruit and grapes (9.8 percent), vegetables (5.3 percent), milk, cheese and eggs (3.0 percent), sugar, jam, honey, chocolate and confectionary (1.0 Percent);

Housing, water, electricity, gas and other fuels: prices in the group increased by 2.7 percent, contributing 0.21 percentage points to the overall CPI change. Prices were up for electricity, gas and other fuels (2.5 percent), also for water supply and miscellaneous services related to the dwelling (7.7 percent);

Clothing and footwear: prices decreased by 2.1 percent, contributing -0.08 percentage points to the overall CPI change. Prices were down for footwear (-3.5 percent) and clothing (-1.5 percent).

As to annual inflation, that implies a growth in general price level compared to previous January, the change in prices in the following groups have mainly shaped prices:

Food and non-alcoholic beverages: prices increased by 4.7 percent, contributing 1.44 percentage points to the annual inflation. Prices were up for the following subgroups: fruit and grapes (13.5 percent), milk, cheese and eggs (7.9 percent), meat (6.6 percent), vegetables (4.3 percent), coffee, tea and cocoa (4.3 percent), oils and fats (4.0 percent);

Transport: prices increased by 6.6 percent, contributing 0.91 percentage points to the annual inflation. The prices rose for operation of personal transport equipment (9.7 percent) and transport services (3.4 percent). Meanwhile, prices were down for purchase of vehicles (-9.2 percent);

Alcoholic beverages and tobacco: prices increased by 11.5 percent, with a relevant contribution of 0.75 percentage points to the overall index growth. Prices within the group were higher for tobacco (19.8 percent) and alcoholic beverages (3.5 percent);

Health: prices were up by 6.4 percent, which resulted in a 0.52 percentage point contribution to the overall annual inflation. Prices increased for subgroups of medical products, appliances and equipment (10.7 percent), out-patient services (5.4 percent) and hospital services (2.8 percent).

Housing, water, electricity, gas and other fuels: prices increased by 4.2 percent, contributing 0.35 percentage points to the annual inflation. Prices rose for electricity, gas and other fuels (4.6 percent), also for water supply and miscellaneous services related to the dwelling (7.7 percent).

According to Geostat indicators, increased prices on food and soft drinks have mainly shaped inflation indicator. Since poverty level in Georgia is 21.3% (the 2016 indicators), food, payments for public utilities and essentials occupy a main place in expenses of our citizens.

Consequently, inflation level for these citizens are higher than 4.3%. Increased tariffs on electricity and natural gas heavily burden socially vulnerable population.