In time, money’s purchasing power decreases as a result of inflation and currently one can buy less goods and services with GEL 1 than was previously possible. This process is called inflation. Given certain needs, different indicators can be used to measure inflation. Consumer inflation is measured by the Consumer Price Index which consists of 308 types of most often consumed goods and services and they are divided into 12 groups.
Current inflation is a critical problem for the population. Since December 2019 up to November 2022, the general inflation rate; that is, the price growth indicator reached 28.5%. It has been over a year since inflation reached this level and it is consistently being kept at double-digits. As compared to the previous month, the inflation rate in Georgia increased by 0.5% in November 2022. The annual inflation rate is still high (November 2022 to November 2021) and amounts to 10.4%. Georgia has not had an inflation rate this high for more than a decade. Certainly, this predicament poses massive problems for the population.
Of note is that since 2022, the National Statistics Office of Georgia has been publishing the Harmonised Indices of Consumer Prices (HICP) which was developed in 2020 as a part of the EU’s Twinning programme whilst relevant statistics have been published since 2022. The HICP is an official inflation measurement indicator in EU member states as well as in the UK and enables inflation comparison. In accordance with the National Statistics Office of Georgia and the HICP, the expenditures of both residents and non-residents incurred within the country are used to calculate the consumer basket weight whereas only the expenditures incurred by residents, both within the country and abroad, are used for the CPI. In addition, there a slight difference in terms of the consumption classification. Based on the available data as illustrated in Table 1, the difference between inflation rates calculated by the Consumer Price Index (CPI) and the HICP varies. For instance, if January 2022’s annual inflation rate was 13.9%, HICP inflation was 1.2 percentage points lower at 12.7%. The difference between the two figures in November 2022 was 0.1 of a percentage point whilst in May they were identical.
Table 1: Monthly and Annual Inflation Rates for the First Nine Months of 2022 Based on CPI and HICP
Source: National Statistics Office of Georgia
According to the information of the National Statistics Office of Georgia, November 2022’s inflation was largely affected by price changes in the following groups: first, food and non-alcoholic beverages where prices increased by 16.8% and which reflected on the annual inflation by 5.55 percentage points. Of note is that inflation vis-à-vis food sharply exceeded the general inflation which poses a critical problem for the population, especially those socially vulnerable. There was a 15.4% price growth in accommodation, water, energy and gas which added 1.51 percentage points to the annual inflation rate. Price growth in this group was mostly precipitated by the increase in prices for accommodation (by 34.1%) as a result of the sharp growth in demand for apartments for rent in light of migration waves following Russia’s invasion of Ukraine. This situation, together with a notable rise in income for people working in the real estate business, also gave rise to other previously unfamiliar problems for the population. Prices in transport increased by 8.2% which contributed 0.97 of a percentage point to the growth of the total inflation rate. Prices have gone up in transport services (13.8%), the use of personal vehicles (8.2%) and the purchase of vehicles (2.1%) which is partially attributable to the sharp growth in oil prices which creates another serious problem for the population alongside higher food prices. Of mention is that inflation vis-à-vis transport sends the price growth effect to other consumer groups since transportation is an interim product for nearly all goods and services.
As compared to the HICP, prices increased more vis-à-vis accommodation and utilities (1.1 percentage points), hotels, cafes and restaurants (1.2 percentage points) whilst prices decreased vis-à-vis garments and footwear (2.1 percentage points) as well as for vacation, leisure and culture (0.9 of a percentage point).
Table 2: Annual Inflation for November 2022, Based on CPI and HICP
