April 30, 2016 FPI | Food Prices Go Down as Turkish and Iranian Floodgates Open
28 April 2016

According to data from the last two weeks of April, retail food prices are down 4.6% y/y (compared to April 2015) and 0.6% m/m (compared to March 2016). During these two weeks, we have seen the biggest drops in the prices of eggplants (21.4%), buckwheat (9.4%), and tomato (9.0%). Only one (!) product increased in price during this period: greens (up 3.8%).

Georgian Consumers Will Celebrate All the Way to the Easter Table

Traditional Georgian households have been fasting the last few weeks, which implied reduced consumption of sugar, eggs, dairy products, fish, and meat. Lower demand may have been a factor in keeping food prices at bay, however, the downward trend in prices started more than a month before the Great Lent, in February 2016. This trend has little to do with Georgian religious traditions. Rather, it is best explained by the resetting of Georgia’s economic relations with Iran, on the one hand, and its role as a temporary buffer for Russia-banned Turkish products, on the other.

For now, Georgian consumers emerge as the clear victors of these external geopolitical developments. A few fresh food prices have been slashed by more than 50% y/y. Even the cheapest networks became slightly cheaper. Hard-pressed by their competitors, the most expensive retailers had to make drastic adjustments, leading to a convergence in prices. By mid-April, the gap between the priciest and cheapest retail chains reached its historical minimum since FPI’s launch in fall 2014. This is excellent news given that this Sunday Georgian families will be gathering around the Easter table for a special meal to break the fast.

As shown in the chart, the y/y downward trend in food prices is driven mostly by vegetables and fruits, with some of them losing more than half of their price over the last 12 months. Garlic (up 33.5%) is an interesting outlier.