Inflation rose 2% in December from a year earlier, mainly driven by transport, fuel and food costs, the Georgian state statistics office, Geostat, said on January 3.

Annual inflation was 1.9% in November.

Month-on-month inflation was 0.6% in December, according to Geostat.

Transport and fuel prices remained key drivers of annual inflation in December with prices on transport increasing 22.4% and fuel prices going up by 10%.

Prices on food and non-alcoholic beverages increased 0.9% y/y in December.

Georgia’s annual inflation started slowing down in June after hitting 14.3% in May, 2011.

In December the National Bank of Georgia decreased its main policy rate by 25 basis points to 6.75%.

“In the third quarter of this year the real growth of the economy reached 7.5%. Nevertheless, the output gap is still negative, indicating that this growth in aggregate demand does not bear inflationary risks,” the central bank’s monetary policy committee said on December 21.

“In the fourth quarter the growth of bank loans to the economy has decreased, indicating the weakening of the domestic demand. Given that the current trends indicate the weakening of the demand the inflation forecast had been revised downwards,” it said.

The central bank also said that annual inflation was expected to remain “low” in the first half of 2012, before starting “moderate increase” from the summer, 2012.