Deputy Head of Central Bank: Monetization in Armenia has increased from 15%-20% to 38% over last 5 years, while no other CIS country can make boast of this

"Monetization is a result of investments in economy and productivity, not an issue of money. From this point of view, the monetary policy is a consequence and cannot have a stimulating effect. The monetary policy should not affect the economic potential. Therefore, it is necessary to focus on the investment field.  The banking sector has invested in the economy of the country $1.9 billion amid downward trend of private transfers. Industrial loans accounted for 20% of the total exceeding the lending to the other sectors of economy. It was overwhelmingly long-term loans," he said.

 

According to Yeritsyan, to soften the monetary and credit conditions, along with repeated reduction of the refinancing and Lombard rates, the CBA has nullified the compulsory reservation requirement for dram 

deposits, which enabled the banks to undertake longer-term liabilities for deposits. In addition, the CBA softened the credit risks assessment for banks in case of financing of exporters in terms of US dollars, reducing the previous 105% to 100%. This helped banks reduce the interests and increase the maturity of loans for economic entities. Nevertheless, the slackening development of the real sector of economy has affected the quality of the loan portfolio over the last year. Yet, even in such conditions, the bank assets grew, though moderately. 

 

The CBA's policy is focusing on such factors as stability of prices, financial stability, development of the financial market, financial steps towards infrastructure development, institutional process. "The last point is a priority for the coming 2-3 years. In particular, the CBA looks to base its monetary policy on deeper and independent analysis and survey to rule out any suspicions that IMF and WB dictate us their policy. This is not so, and let's not raise this issue again. We are able to conduct independent macroeconomic policy," Yeritsyan said.

 

According to CBA's forecasts, the annual inflation this year will be at the upper limit of the target range - 4% +/- 1% and will approach the target indicator till the end of the year. At the moment, the inflation is 3.6%, Yeritsyan said. In his words, amid general negative trends of global economy, the CBA forecasts reduction of the economic growth rates. Although the forecasts were inherently very optimistic, this year the economic growth will be 2.5%-3.8%, Yeritsyan said. The GDP growth for the coming 3-4 years will total 3.5%-4.5%. In 2016, CBA forecasts stabilization of the economic growth indicators, restoration in 2018.  According to CBA's forecasts, the private consumption and private investments will suffer decline this year, amid 7%-9% growth of export of good and services and 4%-6% decline of import of goods and services. 

 

Nerses Yeritsyan went on saying the share of export to the countries of the Persian Gulf and China has significantly increased in total export from Armenia over the last years. Meantime, export to Russia as certainly decreased. Nevertheless, general export volumes continue growing and it is anticipated that this upward trend will continue in the long-term outlook.

 

As to the gold reserves, he said, they were nullified in 2003, and Armenia is not the only country in such situation. He said diversification is needed.  "I do not say that it is (the current situation) is good or bad, simply we have no gold reserve and it is a fact," he said.  

 

In his words, the current structure of reserves enables CBA to settle the tasks set i.e. to ensure sufficient reliability and profitability of reserves. "Making investments in the resource 'having low and instable profitability' is unreasonable, as it may create a liquidity problem for the Central Bank. Big reserves should be preserved in terms of gold and precious metals to receive profits from fluctuations that happened once in 10-15 years. I think at present it would be wrong buying gold in the international market, but it is my personal opinion," Yeritsyan said.