Tbilisi (GBC) - The Parliament of Georgia has voted on and approved the draft resolution “On the Main Directions of Monetary and Exchange Rate Policy for 2026–2028”, which outlines the level of the inflation target, the main monetary policy instruments used to achieve the target, as well as a review of the current macroeconomic environment and potential risks. The document was presented to the legislature by the Governor of the National Bank of Georgia (NBG), Natia Turnava.
At the plenary session of the Parliament, the NBG Governor Natia Turnava, emphasized that under the existing monetary policy framework where the key monetary policy instrument is the policy rate consistent steps toward both tightening and normalization, taking into account the effectiveness of transmission to the economy, ensure price stability in Georgia.
“In October, the NBG updated its macroeconomic projections. According to the current baseline scenario, inflation will temporarily remain above the 3% target and will average 4.0% in 2025; however, in the medium term, supported by tight monetary policy, normalization of aggregate demand, and the fading of inflationary effects stemming from food prices, inflation will stabilize around the target level,” stated Natia Turnava.
She emphasized the high level of economic activity and noted that it is largely driven by structural changes in the economy. In particular, the improvement of production potential partly offsets the impact of strong aggregate demand on prices.
“According to preliminary data, average economic growth for the first nine months of 2025 stands at 7.7%. In line with the NBG’s baseline forecast, economic growth will reach 7.4% in 2025. In the following years, the pace of real activity will gradually normalize toward its long-term level,” she noted.
According to Natia Turnava, under an inflation-targeting regime, decisions regarding the policy rate and its future trajectory are made based on forecasts. However, uncertainty has increased significantly in recent years, raising the risks of deviations from projections.
“Since the beginning of 2025, the NBG has introduced a new scenario-based approach to monetary policy communication, which has made the decision-making process more transparent and anchored risk management in the detailed analysis of potential scenarios. Specifically, in conducting monetary policy, the NBG responds in a way that minimizes economic losses should any identifiable risk materialize,” Natia Turnava stated.
When presenting the report, the NBG Governor also spoke about the high global economic uncertainty and rapidly changing environment, driven by ongoing geopolitical tensions worldwide. She highlighted the risks affecting inflation in both upward and downward directions, such as changes in prices of energy and food commodities, transportation costs, regulated prices, global economic fragmentation, and other factors. In her assessment, in order to minimize the impact of these risks, it is optimal to maintain a cautious approach toward the normalization of monetary policy.
“According to the current baseline forecast, prepared with consideration of macroeconomic risks, the NBG will continue normalizing the policy rate at only moderate intervals. In the medium term, as inflation expectation risks continue to subside, the rate will stabilize around its neutral level, which is currently assessed at approximately 7%. It should be noted that the expected trajectory of the policy rate depends significantly on how global economic conditions and geopolitical developments unfold,” stated Natia Turnava.
In her remarks, the NBG Governor underscored that international reserves are a key guarantee of the country’s macroeconomic stability. For this reason, the NBG is consistently focused on the accumulation of reserves and their effective management.
“Given the favorable conditions in the foreign exchange market, the NBG has been actively accumulating reserves since the beginning of 2025. Accordingly, as of January–October 2025, the Bank’s net purchases amounted to USD 1.8 billion. As of October 2025, the volume of international reserves exceeds USD 5.6 billion. At the same time, the effective management of international reserve assets is of great importance. For this purpose, the addition of monetary gold to international reserves is a strategic decision of the NBG, aimed at mitigating global inflationary risks and preserving the purchasing power of reserves. The price of gold on the international market has been rising, and since the moment of purchase, the increase in gold prices has boosted reserves by USD 420.6 million as of October,” Natia Turnava stated.
Within her report, Natia Turnava also reviewed the NBG’s larization policy and the measures implemented to strengthen monetary policy transmission to the economy and to reinforce financial stability.
“As of October, 58 percent of the total loan portfolio is denominated in lari. Of particular note is the high degree of larization of loans to individuals: specifically, 76.9 percent of loans to individuals are denominated in the national currency. The NBG continuously analyzes dollarization dynamics and, when necessary, undertakes appropriate measures. This not only reduces borrowers’ foreign-currency and related credit risks but also promotes long-term economic growth,” Turnava stated.
She also addressed the Bank’s larization policy more broadly. According to her, ensuring price stability increases confidence in the lari, as evidenced by the larization trends of deposits in the banking sector. As of October, 51.2 percent of total deposits are denominated in the national currency.
In conclusion, Natia Turnava emphasized that the presented monetary and exchange rate policy framework ensures price stability over the medium term. Consequently, it will enhance Georgia’s economic resilience to potential shocks and support stable and long-term economic growth.
