Djavadyan: the higher level of dollarization and slow decrease of deposit rates restrict the shunt of the Central bank in respect to the further softening of monetary-loan terms

ArmInfo. The higher level of   dollarization and slow decrease of deposit rates restrict the shunt  of the Central bank in respect to the further softening of  monetary-loan term, but the main task of the regulator is  to provide  the prices sustainability.  Such a statement was made by Arthur  Djavadyan, the Chairman of  the  Central Bank of Armenia,  while  commenting on the margins of his interview to ArmInfo  the  possibility of  review of  refinancing rate decreased  on February 14  this year from 6,25% to 6%. He reminded that in the beginning of the  stage of monetary loan terms softening it formed 10,5 %, after which,  starting with August 2015 the Central Bank started to decrease  step  by step the key interest rate, to give a pulse to inflation and  consumer demand. He clarified that the consumer prices in Armenia  have been decreasing in Armenia recently due to economic crisis  in  Russia, affecting the consumer demand for the reason of  Armenian  nationals  money  transfers decrease from  Russia. 

 "The Central Bank of Armenia is not intended to continuer softening  the monetary policy, aimed at step by step increase of inflation,  because considers that too low rates may generate risks. The rates  lower than those of current level might  negatively  impact the real  and financial sectors of economy. That is why the Central Bank will  be more careful while reviewing the options of those further  decrease," Djavadyan stated accentuating  as follows: " We evaluate  the depreciation of monetary-loan terms as sufficient." Another  decision on the rate level is to be taken by the Central Bank of  Armenia on March 28 this year.  In annual view ( February 2017 versus  February 2016) the consumer market shows  a deflation - at 0,2%  (versus that  of 1,7 for the same period of last year), but in this  case the nonfood  products and services tariff prices show almost  equal step of decrease - for 3,5 and 3% respectively, while the  foodstuff prices flew up for 3,1 %.

In January-February 2017 the consumer prices increased for 1,7%   being caused by foodstuff prices increase for 5,5 %, within the  nonfood products price decrease for 1,2% and services tariffs  drop  down for 1,6.  In comparison to January-February 2016 the deflation  at the consumer market formed 0,4% due to the 3,4%  dropdown of  nonfood products prices, as well as of services tariffs decrease  for  2,5%, while the foodstuff prices grew for 2%. According to the  information shared with ArmInfo by the National Statistics Service of  Armenia, the consumer prices in Yerevan decreased in February for 1%  versus that for 1,5 % a year ago.

If the Central Bank estimates that the targeted indicator derivation  risks  in respect to the inflation do increase, it will respond in a  proper manner using all the appropriate tools to secure the  sustainability in the country," Djavadyan said, adding that in the  average-term prospective  the prices will remain at the same level,  and the inflation fastening up to 4% indicator by the end of  2019  should be gradual.  " We think  that this (gradual reaching  the key  indicator of inflation) will provide the general balance of the  economy with minimal   negative consequenses," the general banker  mentioned.   

According to CBA forecast, the inflation in 2017 will form 0,6%, in  2018  - 2,2%. Djavadjyan said also that the Central bank could  increase the country economy growth forecast, but for the year of  2017 it will remain in the range of 2,2 - 2,3 %. "The growth is  preconditioned  mainly with recovery of internal demandaqnd   effective implementation of    government projects aimed at the  improvement of export and investments, as well as with the structure  reforms in progress," the Central bank Chairman mentioned.  The  Central Bank Head thinks that  the commercial banks with their number  decreased in 2017 by 4 down to 17, have demonstrated a good  resistance to shocks and risks. " The ability of banks to cover the  risks has increased, and, as the consequence, the liquidity grew as  well, creating a potential for funding new business projects," he  said, informing also that the sufficiency of the banking sector  capital forms 20%, the share of non-working assets in 2016 decreased  for 1 percent based point - down to 6,2%, and the foreign investors  share makes 62 % of Armenian banking system  capital. 

To note, as of the year of 2017 the financial network of Armenia  comprises 17 banks, 33 lender companies and 6 insurance entities. In  2016 the Procredit Bank (unified with INECOBANK), BTA Bank (unified  with ArmEconomBank), Areximbank-Gazprombank Group (unified with  Ardshibank), and Armenian Development Bank (unified with Ararat bank)  dropped off the market due to dissolution and restructuring  mentioned.

As of January 1, 2017 the assets of banking system formed AMD 4.05  trln ( annual growth at 22,9%), loan exposures   formed AMD 2,6 trln,  exposures in stae securities - AMD 423.4 bln (growth for 76,9%), time  deposits - AMD 1,6 trln (growth for 29,2%), call liabilities -  AMD  692,1 bln (growth for 28%). The summarized total capital OF Armenian  banks in 2017 reacherrd AMD 648,6 bln, within  one year view  increasing for 29,3% in annual view in general due to the growth of  statutory capital, which growth  form 38,3%. The year of 2016 has  been completed by the banking system of Armenia with net profit  forming AMD 18, 3 bln ( the forex exchange rate as of 31.12.2016  formed AMD 483,94/USD 1)