Inflation in Georgia

A short history of inflation in Georgia

The Russian Embargo (2006)

Georgian inflation peaked at 14.5% in the year to July 2006. In March that year Russia banned Georgian wine and mineral water, closing the market that took most of both, and Gazprom roughly doubled the price of the gas it sold to Georgia from January. An economy losing its main export market and paying twice as much for its heating in the same year had little defence against the arithmetic.

The opposite followed six years later: prices fell for most of 2012 and into 2013, reaching -3.3%. Georgian inflation has swung between those poles more than most, which is what a small open economy next to a large and occasionally hostile one tends to produce.

Post-Covid Inflation (2021 to 2023)

In Georgia, prices rose fastest in January 2022, at 13.9%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.