Javadyan: Macroeconomic and financial stability predetermined economic growth in the mid-term

According to him, the Central Bank have been taken steps throughout 2015 on easing the inflation expectations and absence of external inflation pressure and decline of prices on agriculture products due to favorable climate conditions also contributed to this. For the reported period Central Bank has several times revised fiscal conditions toward easing and especially the last decline of the refinancing rate from 9.5% to 8.5% on December 22 brought the situation to the normal state, as it was till November 2014. As of now the top-priority goal is to keep dram from fluctuations. 

 

"The main goal of CBA is to ensure stability of prices and low level of inflation. The world experience shows that only in case of low and operated inflation long-term growth of human well being and stability 

on financial markets is possible. CBA and international structures' evaluations testify that currently the rate of dram is balanced and responds to economic factors. It is necessary that economic entities 

prefer dram and decrease the level of dollar assets, which is already high", Javadyan emphasized. 

 

Unbalanced growth of risks and profits in the private sector due to external shocks decreased credit capacity of banks' clients and worsened quality of credit portfolios. The banks in such situation 

preferred to deal with financially reliable clients, the number of which unfortunately has sharply declined in recent years. 

 

According to Javadyan in any case, for the recent 7 years the loans provided by the banks increased 5-fold with 26% average year-over-year growth, and the share of loans in GDP increased 3.5-fold to 48%. Despite of the trend of worsening of indicators, characterizing the financial stability, growth of liquidity and capital adequacy have been registered in the Armenia's banking sector in 2015.  Central Bank's new requirement for the banks' minimal total capital - 30 billion drams to be introduced in the banking system of Armenia starting January 1 2017 also played a role. The goal of the new standard is to ensure financial mediation in long-term perspective and make the banks more resistant to external shocks. As 

a result 6 banks have already increased their capitals and the rest take steps in this area. It was already announced about two mergers (BTA Bank will join Armeconombank and Procredit with INECOBANK). This process is going on successfully and this is inevitable. 2015 was related to issue of loan portfolio backed bonds (issuer is  "LOAN PORTFOLIO SECURITIZATION FUND I"). Two banks have increased their capitals through IPO (Unibank and Ameriabank, ed. note). 

 

Growth of deposits by 9% in 2015 also testifies to the financial stability, which was mainly determined by the increase of deposits of physical entities. In this context Javadyan noted that growth by 5.5-fold of the guaranteed deposits (up to 10 mln AMD for dram deposits and to 5 mln AMD for dollar deposits) as well as significant change of the term of compensation (from 1 year to 7 days) are very importance factors. 

 

Summarizing his speech Javadyan emphasized that in the upcoming 2 years institutional fundaments of the coordinated fiscal and financial policies should be strengthened, which in their turn will guarantee the stability of prices and, which is the most significant, will ensure stability of the financial system, regenerate the activity, improve insurance market and let to apply new products.