THE IMPACT OF THE RUSSIA-UKRAINE WAR ON GEORGIA'S ECONOMIC ACTIVITY

A global threat to food supplies has emerged in the wake of the Russia-Ukraine war. A number of developing countries are already pointing to shortages of basic consumer goods such as wheat, corn, buckwheat, sunflower. Food supply risks are significantly linked to and exacerbate global inflation, which began in the second half of 2021 amid a pandemic and is already approaching double-digit levels even in developed economies. Annual growth in consumer price indices last month was 8% in the US, the Eurozone, the UK and other developed economies, and as output price indices range in the 10-20% range, inflation is not expected to slow in the near future. This phenomenon is known as supply-side inflation and poses an additional challenge not only to economic policy makers, but also primarily to producers and consumers. The developments due to the Russia-Ukraine war and the sanctioning of Russia have significantly increased the demand for the Georgian corridor, which is both an opportunity and a challenge. Amid rising inflation risks, monetary policy is in a tightened phase as a result of the gradual increase in the monetary policy rate over the past year. The National Bank of Georgia is expected to tighten monetary policy until the risks to rising inflation expectations are sufficiently mitigated. The double-digit economic growth achieved by Georgia recently is significant. In the first quarter of this year, Georgia's economic growth amounted to 14.4%. Our country has dealt with the challenges with dignity, has maintained the stability and development of the economy in the light of current events in the world. It is noteworthy that according to the International Monetary Fund, the Ukrainian economy is expected to shrink by 44% and the Russian economy by 13%. In our neighboring countries, the economic growth rate is a single digit. The National Bank of Georgia should continuously monitor the current economic processes and financial markets and use all the tools at its disposal to ensure price stability; Despite the Russia-Ukraine war, Georgia's financial sector must remain resilient and respond adequately to this challenge.