The Khachapuri Index reached a new historical high in February 2020. The Index continued its upward trend, reaching an average cost of 4.35 lari in February 2020. This is 1.3% higher than in January 2020 (m/m) and 22.9% higher when compared to February 2019 (y/y). The main contributors to the Khachapuri Index’s inflation since last year were cheese (36.5%) and flour (10.7%). Furthermore, as shown in the chart, the year-on-year price of all khachapuri ingredients—milk (3.7%), butter (2.5%), eggs (6.6%), and yeast (8%)—rose compared to February 2019.

Usually, at this time of year, there is an increase in the supply of fresh milk, which leads to a corresponding decline in the price of cheese and other dairy products. However, the depreciation of the Georgian lari against the US dollar still has an upward pressure on the price of imported khachapuri ingredients and, most importantly, on imported milk powder, which is heavily consumed by producers as a substitute for fresh milk. As a result, the increased supply of milk cannot outweigh the impact of the domestic currency’s depreciation together with more expensive imports.

Recent Khachapuri Index dynamics are in line with the dynamics of GeoStat’s reported prices in the food category containing milk, cheese, and eggs. According to GeoStat, the prices in this food subgroup increased by 19.2% y/y. Such a big increase in this subgroup is partly responsible for the overall increase in food and non-alcoholic beverage prices (12.7% y/y).