ISET

With the New Year festivities finally behind us, ISET’s Khachapuri Index started on its seasonal downhill trajectory. In January, the Index slid 4.3% m/m, reaching 3.61 GEL per one standard portion of the Imeretian khachapuri. At the same time, it is some 6% higher y/y (compared to January 2015).
Interestingly, the Index currently takes nearly identical values all over Georgia, adhering to the “Law of One Price”. According to this economics concept, similar goods should be sold at roughly the same price in all locations in a country (assuming no artificial trade barriers and low transportation costs). The idea behind this law is very simple: if prices were to significantly diverge, shrewd traders would use this “arbitrage” opportunity to profit. They would buy low and sell high until prices converge.

The average cost of cooking one standard portion of Imeretian Khachapuri stood at 3.61 GEL in January 2016. This is 4.3% lower m/m (compared to December 2015), and 6% higher y/y (compared to the same month of previous year, January 2015).Thus, annual inflation, as measured by ISET’s Khachapuri index, is roughly in line with the official estimate of 6%, based on GeoStat’s Consumer Price Index (CPI).
The prices of all khachapuri ingredients, except flour, are up in annual terms (see chart), that is compared to January 2015. Understandably, prices of milk, cheese and most other products are under pressure given the massive devaluation of the Georgian lari over the course of 2015 on the one hand, and the country’s reliance on imported food products and ingredients, such as milk powder, on the other.

The New Year is approaching, and Georgian housewives are already preparing for this great event. So does the ISET-Policy Institute. The special dish we have cooked for our readers is a New Year Supra Index. Served on the Georgian Supra Map, the Index shows the cost (in GEL) of a standard supra meal for a family of 5-6 persons in each one of Georgia’s regions. Included in our calculations are such traditional dishes as khachapuri, mtsvadi, satsivi, trout, fried chicken, Olivier salad, pkhali, cucumber & tomato salad, and – for desert – gozinaki and fruits.

The average cost of cooking one standard portion of Imeretian Khachapuri increased to 3.66 GEL in November 2015. This is 1.4% higher m/m (compared to October 2015), and 9.6% higher y/y (compared to the same month of previous year, November 2014). Given that it mostly consists of food prices that are subject to sharper seasonal fluctuations, the upward trend in Khachapuri Index is somewhat steeper than that of GeoStat’s official Consumer Price Index (CPI). The latter is up 0.3% m/m, and 6.3% y/y.

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