The president of the National Bank of Georgia (NBG) told lawmakers on May 10 that inflation was 8.8% in 2006, 5.6% of which had been triggered by external reasons, including Russia’s economic embargo.

“Inflation in Georgia was not triggered by internal monetary reasons. The major reason behind inflation was external pressures,” Gotsiridze said while presenting the NGB’s annual report to Parliament.

He said that 5.6% of the inflation rate was triggered by “reasons beyond the National Bank’s competences.”

“For example, the price of bread increased by 11% which made up 0.2% in the total inflation rate; it was triggered by Russia’s embargo… The price of natural gas increased by 34.9% which made up 0.3% in the total inflation rate. The price of sugar increased by 15% and its share in the total inflation rate was 0.3%; it was triggered by an increase in the sugar price on world markets… The price of eggs went up by 22% last year because of bird flu; you know that we had to ban the import of poultry from neighboring countries and a large number of poultry was culled in western Georgia,” Gotsiridze said.

He said that the price of electricity last year increased by 58.9%, constituting the largest share in the total inflation rate - 1.6%.

“It was also triggered by Russia’s decision to increase the price of gas,” Gotsiridze added.

He said that external pressure on the Georgian economy had been overcome thanks to foreign investments.

“Large amounts of foreign currency has been transferred to Georgia. Money transferred from abroad by private persons to Georgia totaled up to USD 600 million and foreign direct investment in Georgia reached USD 1.2 billion last year,” Gotsiridze said. Foreign direct investment was USD 1.14 billion in 2006, according to the Georgian Department of Statistics.