Georgia’s annual inflation rate eased to 5.7% in May 2026 — down from 5.9% in April — shortly after the National Bank raised its refinancing rate to 8.25% for the first time in four years. However, some economists argue it is too early to attribute the slowdown to monetary policy.
According to the National Bank, the 0.25 percentage point increase to the refinancing rate was aimed at slowing inflation expectations amidst growing uncertainty caused by the Iran war and rising global energy prices, particularly through the Strait of Hormuz.
The bank’s first Deputy Governor, Ekaterine Mikabadze, wrote in an emailed statement on Wednesday that the inflation’s decline to 5.7% was fully consistent with the National Bank’s central scenario and forecasts. Despite continued geopolitical uncertainty, inflation slowed by 0.2 percentage points from April levels and is believed to continue gradually easing.
‘The future path of inflation depends significantly on the duration and intensity of the conflict. Under our baseline scenario, if tensions gradually subside, inflation should continue to decline and stabilise around the target level of 3% in 2027’, Mikabadze said.
The National Bank confirmed that Georgia’s economy has remained resilient despite rising prices. Economic activity expanded by 10.7% in March and 9.1% during the first quarter of 2026, supported by strong performance in high-productivity sectors. However, policymakers cautioned that inflation risks remain tilted to the upside. Prolonged geopolitical instability could push commodity prices higher and deepen supply-chain disruptions, potentially requiring further monetary tightening.
As for the monthly change in May, consumer prices increased by 0.3%, with food prices remaining the largest contributor to inflation, rising 5.2% year-on-year. Transportation costs were the second-largest driver, reflecting a sharp increase in fuel prices. Overall fuel costs rose by 22.7% compared to the same period last year.
The products that recorded the largest annual price increases in May included:
- Green beans (+118.87%)
- Plums (+79.92%)
- 958-grade gold wedding rings (+53.76%)
- Diesel fuel (+47.99%)
- Newspapers (+41.35%)
- Pears (+36.83%)
- Tomatoes (+36.74%)
- Peppers (+32.91%)
- Smoked fish (+31.20%)
- Magazines (+29.57%)
Meanwhile, prices fell most significantly for:
- Potatoes (-26.4%)
- TV sets (-22.6%)
- Garlic (-22.13%)
- Internet service fees (-22.04%)
- Oranges (-20.08%)
- Mandarins (-18.78%)
- Plates (-17.54%)
- Washing machines (-16.29%)
- Refrigerators (-15.32%)
- Children’s tights (-14.45%)
Some economists, however, dispute the idea that the decline in May inflation reflects the impact of tighter monetary policy. Paata Bairakhtari, an economist and founder of the Free Businessperson’s Association, told OC Media that the slowdown appears to be seasonal rather than the result of the central bank’s recent action.
‘The refinancing rate that was increased responds to a demand shock, not a supply shock. And even if that weren’t the case, a 0.25 percentage-point increase changes nothing’, Bairakhtari said.
He added that monetary policy operates with a lag and that the rate increase would not have had sufficient time to influence inflation over such a short period.
The National Bank’s next Monetary Policy Committee meeting is scheduled for 17 June. TBC Capital forecasts that the National Bank will maintain a tight monetary policy and keep the refinancing rate at 8.5% throughout 2026, as consumer prices are expected to continue rising and inflation is projected to reach 6% by December.
