## Georgia: Selected Issues

_IMF Staff Country Reports, May 24, 2024_

## Source details

**Canonical URL:** [Georgia: Selected Issues](https://www.imf.org/en/publications/cr/issues/2024/05/24/georgia-selected-issues-549482)

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## Bibliographic details
- Published: May 24, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400275081.002

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### Executive summary
- This Selected Issues paper explores drivers of inflation and monetary policy in Georgia.
- Inflation spiked in Georgia following the pandemic and Russia’s war in Ukraine.
- A positive output gap indicates that high demand is generating inflationary pressure in the economy.
- Estimates suggest tighter monetary policy in 2021 helped significantly lower peak inflation in 2022.
- One response to uncertainty is for monetary policy makers to act more cautiously – responding less vigorously with monetary policy to shocks.
- Using a range of approaches, IMF establish that monetary policy in Georgia is effective, that it is close to neutral, and that heightened uncertainty supports a gradual policy normalization.

### Analysis of inflation drivers and transmission
- Drivers identified:
  - Pandemic-related disruptions.
  - Russia’s war in Ukraine.
  - High domestic demand evidenced by a positive output gap.
- Transmission considerations:
  - The paper examines the monetary policy stance including the natural rate.
  - The transmission mechanism is assessed, including the impact of dollarization in a highly dollarized, small open-economy prone to large external shocks.

### Monetary policy stance and effectiveness
- Key findings:
  - Tighter monetary policy in 2021 helped significantly lower peak inflation in 2022.
  - Monetary policy in Georgia is effective.
  - Monetary policy is close to neutral.
  - Heightened uncertainty supports a gradual policy normalization rather than abrupt tightening.

### Policy implications and recommended approach
- Given the challenges (high dollarization, small open economy, large external shocks), the paper highlights the importance of:
  - Assessing drivers of inflation comprehensively.
  - Evaluating the natural rate and appropriate policy path going forward.
  - Recognizing that elevated uncertainty argues for cautious, gradual policy adjustments (responding less vigorously to shocks).

### Publication metadata and identifiers
- Pages: 29
- Volume: 2024
- Issue: 136
- Series: Country Report No. 2024/136
- DOI: https://doi.org/10.5089/9798400275081.002
- Stock No: 1GEOEA2024002
- ISBN: 9798400275081
- ISSN: 1934-7685
- Publication date on page: May 24, 2024
- Subjects: Employment, Inflation, International organization, Labor, Labor markets, Monetary policy, Prices, Unemployment
- Keywords: Central Asia, commodity import price index, Employment, Georgia population projection, IMF staff calculation, Inflation, inflation projection, Labor markets, Middle East, trend inflation, Unemployment

*International Monetary Fund. Middle East and Central Asia Dept. "Georgia: Selected Issues", IMF Staff Country Reports 2024, 136 (2024).*

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## Content in this bundle

- **Georgia: Selected Issues; IMF Country Report No. 24/136; April 29, 2024**
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_Source: https://www.imf.org/en/publications/cr/issues/2024/05/24/georgia-selected-issues-549482_