In October 2020, the Khachapuri Index continued its upward trend and reached 4.37 GEL. This figure is 2.9% higher than the previous month (September 2020) and 12.5% higher than October 2019 (YoY). Every ingredient contributed to the YoY Khachapuri Index inflation: cheese (19.0%), flour (16.3%), butter (12.4%), yeast (16.4%), milk (2.8%), and eggs (0.3%).

As the chart reveals, the price increases are particularly high for internationally traded commodities (butter and yeast) and those that use imported intermediate inputs in production (flour and milk).

The GEL continued to depreciate relative to the USD: with the average GEL/USD exchange rate in October 2020 being 3.22 (2.97 in October 2019). Thus, depreciation of the Georgian lari has placed notable upward pressure on the price of imported goods; with depreciation against the US dollar in excess of 8% in October 2020 compared to October 2019.

In addition, at this time of the year there is a seasonal decline in the supply of fresh milk, resulting in higher demand for imported milk powder. The value of milk powder exports in Quarter II increased by 76% compared to the same period last year (from 4.1 mln. USD in 2019 to 7.3 mln. in 2020). Compared to Quarter II 2019, the unit value of milk powder also went up by 15% in Quarter II 2020. This factor, of course, also contributed to higher dairy product prices.