Economy
Posted: 4 years ago

Prices on Food and Non-Alcoholic Beverages Keep Increasing in Georgia

According to TBC Research, Price hikes are expected to slow down in the future. Prices on food and non-alcoholic beverages were up by 5.7% in 2018 compared to 2017, and grew further by 4.4% in 10 months of 2019.

Excise tax hikes are responsible for the sharp increase in prices on tobacco and alcoholic beverages (+17%) in the same period. Considering National Bank of Georgia (NBG) long-term target inflation rate of 3% and the elimination of excise tax base-line effect, the price growth will be relatively moderate in the future.

Higher urbanization and decreasing unemployment will drive FMCG consumption. Average wages amounted to GEL 1,068 in 2018, up by 7% y-o-y. More rural subsistence farmers are moving to urban areas and entering the formal employment market.

Share of hired employees increased 1.5 p.p. y-o-y to 51% in 2018, accompanied by the higher urbanization rate of 58.7% (+0.3 p.p.), in the same period. We expect this trend to continue, as even though the proportion of agricultural workforce decreased by 3% y-o-y to 39% in 2018, the share remains still high.

Georgia reported population of 3.7mln in 2019, broadly unchanged over the last six years. The lack of population growth is offset by the rapid tourism growth and liberal migration policies that boost the FMCG consumer base.