Tbilisi (GBC) - TBC Capital writes in the weekly update of the chief economist, that the CPI inflation to hit the target at least in July or likely even earlier with the import component leading the disinflationary dynamics.

“On the demand side, while there was evidence of cooling in February trade in goods, the detailed data release indicates a large contribution of several commodities, especially for exports. In particular, a 6.3% YoY increase of exports in USD terms would stand at as high as 36.1% without ferro-alloys and fertilizers. Still, unless the prices recover, the negative contribution of these two products in 2023 growth may be up to 1%. In imports, the impact of a single product – copper ores, was also considerable. Furthermore, non-cash expenses through TBC channels in February and March indicate a still strong domestic demand while some recovery in real credit growth is also observable.

Despite a quite sharply declining outlook for a headline inflation, the NBG will likely need to see more evidence of cooling in underline measures of inflation driven by the demand side. Also, we expect recently elevated uncertainties to be referenced by the central bank. Therefore, while the probability of the first rate cut taking place already next week has increased substantially, we would bet with more confidence on the start of the easing cycle in May”, - TBC Capital said.