Turnava: We are ready to respond to the inflationary shock caused by the Middle East war with a cautious policy

The IMF said inflationary pressures have increased since the outbreak of the conflict in the Middle East, but core inflation remains low. Inflation was 4% at the end of 2025 and reached 4.3% in March 2026, reflecting rising prices for imported food and oil, partly due to the ongoing war in the Middle East. At the same time, core inflation remains below the National Bank of Georgia’s (NBG) 3% target.According to the IMF’s forecast, inflation will remain high in the first half of 2026, driven by rising fuel and electricity prices, and will return to the target by mid-2027, as the effects of one-off increases in food and energy prices are offset, demand declines moderately, and the output gap closes.In line with the IMF’s recommendation, monetary and exchange rate policies should remain focused on ensuring that inflation returns to the target in a sustainable manner. “While the current policy framework accommodates temporary supply-side shocks, the National Bank of Georgia has rightly signaled its readiness to tighten policy if inflationary pressures persist, second-round effects emerge, or inflation expectations become fixed”.The IMF also responds to the interventions, noting that exchange rate flexibility should be maintained and foreign exchange interventions should be limited to mitigating episodes of excessive volatility. They also say that, where possible, continuing to accumulate international reserves would further strengthen precautionary buffers in the face of Georgia’s high dollarization.Progress on the governance reform of the National Bank of Georgia remains important to strengthen institutional safeguards. The financial institution says most of the recommendations of the IMF’s 2022 Security Assessment have already been implemented, including the removal of discretionary transfers to the government, and IMF technical assistance has facilitated further progress.“Steps have already been taken, including the redistribution of responsibilities among executive members and the strengthening of the succession system for the President of the National Bank, which is positively assessed. The authorities also plan to reform the mechanisms for collegial decision-making and the qualification requirements for Board members. Further strengthening of the Board’s oversight mechanisms is important to ensure that the National Bank’s governance framework is fully consistent with international best practices,” the IMF said.It should be recalled that the monetary policy was set at 8% in May 2024 under the previous President of the National Bank, Koba Gvenetadze, and since then, under the current President, Natia Turnava, the Committee has not changed its decision.

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The main requirement is to prove at least 2 years of work or economic activity experience in the IT sector. In addition, a minimum salary threshold has been established - a person must prove that his annual salary is not less than $25,000 (equivalent in GEL) in the last 1 year, based on the income received in the same sector.In addition, the submitted documentation must confirm that he received the salary at least twice during the last 1 year, with an interval of at least 30 days.The full list of documents required to obtain a residence permit is as follows: Application: Application in the prescribed form, indicating the unique code assigned by the State Employment Promotion Agency Identity documents: Copies of the alien's travel document and a document confirming legal stay in Georgia Experience and income certificates: Documents confirming 2 years of work experience in the IT field and an annual income of $25,000 Work permit: Decision on granting the right to work Technical details: Color photo (3/4, in electronic form) and receipt for payment of the service fee. 

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According to the Finance Minister, the title of a bank is an incorrect definition for this instrument. According to him, the presentation of this structure will clarify what mandate this fund will have and what functional load it will have.Alejandro Hagenberg, the head of the International Monetary Fund mission, stated at today's summary briefing regarding the institution that "such an institution exists in many countries, there are also very bad examples in the world, and it is important that it is done correctly if it is to be done. There must be logic in the existence of a development institution - the transparency of this bank will be important".A development bank is a financial institution created by the state or with the participation of the state, the purpose of which is to provide long-term and preferential financial resources to strategic sectors - infrastructure, industry, export, energy, agribusiness and small and medium-sized businesses.In world practice, such institutions play an important role in stimulating economic growth. For example, in Germany, KfW operates, which has become one of the main financial instruments for the country's reconstruction after World War II. In Brazil, BNDES operates, which plays a leading role in financing industry and large infrastructure projects.The idea of ​​establishing a development bank in Georgia has been discussed periodically at the economic policy level for years, especially when the private banking sector has been talking about a shortage of long-term and low-interest resources. The issue becomes active during periods of economic slowdown, regional challenges, or the need to finance large infrastructure projects.Supporters of the initiative say that the development bank will contribute to: Financing long-term investment projects Export growth Support for local production Development of strategic infrastructure However, critics point to risks, including politicization, ineffective management, and the possibility of increasing public debt. International experience shows that the success of such an institution largely depends on transparent governance, a clear mandate, and strong oversight mechanisms.

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According to her, integration into SEPA is of strategic importance for the country, as Georgia serves as a connecting corridor between Europe and Asia, and trade turnover and remittances with Eurozone countries are constantly growing.The President of the National Bank of Georgia identified three main areas where reforms have been practically completed:1. Harmonization of the legislative frameworkAccording to Turnava, the most important step was the approximation of supervisory policies and practices with the EU directives on the prevention of money laundering and terrorist financing. According to him, the progress achieved in this regard was reflected in a number of international ratings and reports, which increases trust between Georgia and the European financial systems.2. Regulation of virtual assetsThe President of the National Bank of Georgia emphasized ensuring transparency in operations related to crypto assets. The developed framework allows virtual asset entities to be managed in accordance with international standards. This progress laid the foundation for Moneyval to improve Georgia's assessment in relation to Recommendation 15.3. Technological infrastructureOne of the main requirements of SEPA is the existence of an appropriate infrastructure. According to Turnava, with the support of the World Bank, the implementation of an instant payment system is underway in a planned manner, the main part of which will be completed this year. In addition, a centralized registry of accounts will be created along with the system, which is a necessary prerequisite from a technological point of view.“We believe that most of the issues have been completed or there are very clear deadlines for the ongoing processes. Of course, we would like the accession process to proceed faster, but we are in constant communication with the relevant structures and we hope that the process will be accelerated,” said Natia Turnava.Georgia submitted its application for SEPA membership in September 2022. It is noteworthy that Moldova, which submitted its application in 2024, has already managed to become part of the system. Inclusion in SEPA will allow Georgian businesses and citizens to conduct transactions in euros without intermediary banks, with minimal commissions and under the same conditions that EU citizens enjoy.

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Georgia’s economic performance has been robust, supported by sound macroeconomic management and policies. At the same time, amid rising global uncertainty, notably from the war in the Middle East, the outlook is becoming more challenging. Assuming the conflict is short-lived, growth is expected to remain strong, albeit moderating, extending the solid performance observed in recent years. While headline inflation has risen above target due to higher food and energy prices, core inflation remains contained. The external position has strengthened, with the current account deficit narrowing and gross international reserves reaching historic highs. Fiscal policy continues to be disciplined, with public debt at a low level. Although the outlook is clouded by heightened geopolitical risks—including due to a possibly protracted war in the Middle East—Georgia is well positioned to absorb external shocks, supported by strong macroeconomic fundamentals and policy buffers. Looking ahead, policies should focus on preserving macro-financial stability and hard-won credibility, while accelerating structural reforms to sustain strong growth and create more jobs.Recent economic developments, outlook, and risks. Growth momentum remained firm in early 2026, before the start of the war in the Middle East. Rapid estimates indicate that real GDP growth reached 8.4 percent in January-February, up from 7.5 percent in 2025. On the supply side, activity was driven by a sustained expansion in information and communication technology (ICT), transport, and education services. On the demand side, private consumption remained the main driver, supported by moderating but still solid real wage and consumer credit growth. Leading indicators suggest that the impact of the war on economic activity has so far been limited and concentrated mainly on tourism. Assuming the conflict is short-lived, real GDP growth is projected to ease to 5.3 percent this year before converging to its potential rate of around 5 percent in the medium term.Inflation pressures have increased since the start of the conflict, but core inflation remained subdued. After ending 2025 at 4 percent, headline inflation stood at 4.3 percent in March, reflecting higher imported food and oil prices, partly related to the war in the Middle East, while core inflation remained below the National Bank of Georgia’s (NBG) 3 percent target. Inflation is projected to stay elevated in the first half of 2026, driven by increases in fuel and electricity prices, before converging to target by mid-2027 as the one-off effects of higher food and energy prices dissipate, demand moderates, and the output gap closes.The external position has strengthened but is exposed to volatile energy prices and tourism receipts. According to initial estimates, the current account deficit narrowed to 2.6 percent of GDP in 2025, supported by strong services exports, lower energy import costs, and robust remittances. Gross international reserves rose to historic highs, exceeding the IMF’s reserve adequacy threshold for the first time since 2022, reflecting sizable foreign exchange (FX) purchases amid strong external inflows and deposit de-dollarization, as well as valuation gains. The current account deficit is projected to widen to 5 percent of GDP in 2026, driven by higher oil prices and lower tourism receipts, and to stabilize around this level over the medium term, as the closing output gap and continued growth of less import-intensive exports—such as ICT and education services—help contain imports.Fiscal performance has been strong. The fiscal deficit declined well below budget targets in 2025, reflecting robust revenues and under-execution of capital spending, while public debt fell below 35 percent of GDP. The 2026 budget appropriately targets a deficit of 2.5 percent of GDP, envisaging a rebound in capital spending. The implementation and procurement bottlenecks experienced last year are expected to ease, with major infrastructure projects moving forward. The outturn is projected to be somewhat lower than budgeted, supported by higher-than-expected NBG dividends and strong revenue performance. The successful rollover of a $500 million Eurobond in January underscores investor confidence in Georgia’s macroeconomic fundamentals and policy credibility.

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According to the Presidential Administration, the Georgian President and Kazakhstani FM reviewed Georgia-Kazakhstan friendly and partnership relations, accentuating successful cooperation in various spheres.They stressed that the partnership is based on mutual respect and both national and regional interests. Mikheil Kavelashvili and Ermek Kosherbayev focused on global political processes, challenges facing the South Caucasus and Central Asia, the rapidly changing geopolitical environment and the increasing role of the Middle Corridor in regional connectivity.Mikheil Kavelashvili thanked Ermek Kosherbayev for unwavering support of Georgia’s sovereignty and territorial integrity.Deputy Foreign Minister Aleksandre Ghvtisiashvili, Head of Friendship Group with Parliament of Kazakhstan Anton Obolashvili and Ambassador Extraordinary and Plenipotentiary of Georgia to the Republic of Kazakhstan Levan Diasamidze attended the meeting.

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The PM and the Kazakhstani FM reviewed the successful cooperation between Georgia and Kazakhstan, positive dynamics in trade-economic cooperation and increasing investments from Kazakhstan in key sectors of the economy, such as logistics, energy, tourism and agriculture.The meeting also focused on the potential of the Middle Corridor and the importance of joint efforts between Georgia and Kazakhstan for the further development of the transit corridor and strengthening its role in regional connectivity.

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Among the strategic markets of Georgian wine, a special growth was recorded in Germany in the first quarter, where exports reached 375 thousand liters, which is 32% more than in the same period last year. Exports to the United Kingdom increased by 9% and reached 86 thousand liters.Also, a 4% increase was recorded in the People's Republic of China, where about 831 thousand liters of wine were exported.In the first quarter, alcoholic beverages were exported to 38 countries. In total, 7.6 million liters of products worth $56.6 million were exported. Revenue from exports increased by 3%.

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