Macroeconomic Forecast Georgia

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The National Bank of Georgia raised its key refinancing rate on February 20 by 100bps to 11.00% in order to ease inflationary pressures amid substantial price growth of 10.7% y-o-y in January, compared to 11.0% y-o-y in December. Inflation remains a key risk to our favourable economic outlook, with GDP currently forecast to come in at 8.3% in 2008. A key risk is the loosening of fiscal policy, with government popularity waning following widespread disaffection with the government's previously austere policy.