Georgia’s central bank kept its key policy rate unchanged at 4.5%, after it was increased by 50 basis points last month.

Annual inflation was 1.3% in February. Monetary policy committee of the National Bank of Georgia said after its meeting on March 25, that depreciation of Georgian lari against U.S. dollar is expected to push inflation up in coming months, but weakening external and domestic demand is likely to offset upside risks to inflation in a medium term.

The central bank said that inflation is expected to reach target level of about 5% by the end of year, but warned that this projection is subject to risk in both, upside and downside, directions as it would largely depend on external factors.

It also said that worsening economic situation in Georgia’s main trading partner countries in the region continues to have negative affect on Georgia with declining exports, remittances and inflow of tourists.

Georgia’s exports declined 26% year-on-year in January-February to USD 324 million; import was down by 2% y/y to USD 1.1 billion. Exports to the countries of Commonwealth of Independent States (CIS) declined by 23% y/y, but there was 9% y/y increase of Georgian exports to the EU-member states in January-February.

Remittances decreased by 22.4% y/y in January-February to USD 157.4 million and number of tourists was down by 7.8% y/y in the first two months of this year.

The Georgian government said it expect economy to grow by 2% this year instead of initially forecasted 5%.