February GDP growth estimate came in at 5.8%, broadly in line with our expectations. The domestic demand remains strong, while for the exports of goods, the negative contribution of ferro-alloys and fertilizers accounted for around 1% of the growth. 

On the GEL side, important to highlight that together with strong inflows, in February, FC credit growth exceeded that of NC being also GEL supportive. However, we stick to our view on the evidence of the GEL being slightly but still above its long-term trend. Furthermore, March CPI inflation released today demonstrated even more cooling than anticipated with -0.6 deflation MoM when adjusted for the seasonality and YoY inflation dropping to 5.3% from 8.1% a month ago. Going forward, despite imported inflation still being a driver, together with the GEL REER pillar, this definitely is GEL negative. Detailed review of March inflation to be followed separately.

In this regard, while the NBG indicated last week that more evidence of the domestic, rather than headline inflation being eased needs be in place, the dynamics of headline inflation, especially when combined with the GEL REER one, is a clear argument for even more FX interventions.