Weekly Report 31 May - 6 June 2016

Headline inflation remains flat at a 3-year low of 6.6% y-o-y in May, supporting the case for the CBRT to cut its overnight lending rate by a further 50 bps at the next MPC meeting

Tourist arrivals decline by 16.5% y-o-y in the first four months of the year, due to persisting tensions with Russia and increased security concerns

Local elections mark a strong come-back for the centre-left Social Democratic party

Fiscal performance is set to deteriorate further during the remainder of the year, pushing the FY:16 budget deficit above its target of 2.8% of GDP

Significant fiscal consolidation in 4M:16, with the 12-month rolling budget deficit narrowing to 1.4% of GDP in April

A neutral fiscal stance in 4M:16, keeping the 12-month rolling fiscal deficit unchanged from its end-2015 level of 3.8% of GDP

Current account deficit narrows to 0.9% of GDP in Q1:16 from 1.4% in Q4:15, on a 4-quarter rolling basis, due to buoyant exports and a favourable energy bill

Significant fiscal consolidation in 4M:16, due to a strong revenue performance as well as primary expenditure restraint

Unemployment rate reaches a 4-year low of 11.6% in April

Headline deflation slows to -2.1% y-o-y in May, mainly due to a weaker decline in prices of volatile fruit and vegetables

Fiscal deficit widens in the first nine months of the fiscal year, due to a sharp increase in interest payments