Friday, September 8 2023 18:08

ArmInfo.Deflation in Armenia is very negligible due to the moderate reduction in food prices and  rising prices for services. Moreover, among food products, the prices  of sunflower oil, flour, cereals and pasta decreased most noticeably,  while vegetables and fruits had a much smaller deflationary effect.   At the same time, service tariffs continued to rise, slightly more  modestly than last year, with double-digit growth in transportation  and recreation, and medical services began to rise more rapidly.

Thus, in August 2023, compared to August 2022, a meager deflation of  0.2% per annum was recorded in the Armenian consumer market (against  inflation of 9.1% a year earlier), which was the result of a  restrained reduction in the price of food products by 2.7%, with an  increase in prices services by 3.6% and in unchanged prices of  non-food products, which nevertheless looks better than last year's  inflation rates in all three positions - 12%, 6.2% and 8.2%,  respectively.

3.2% deflation was also recorded in January-August 2023 (against  inflation of 5% a year earlier), provoked by a reduction in the price  of food products by 7.6%, non-food products by 1.4%, with an increase  in tariffs for services by 1.9 %. As a comparison, we note that in  January-August 2022, food products rose in price by 4.4%, non-food  products by 5.5%, and tariffs for services increased by 5.5%. And on  y-o-y terms (January-August 2023 to January-August 2022), inflation  decreased to 3.1% (from last year's 8.4%), which was rather  contributed by the increase in the prices of food and non-food  products to a small extent, by 1.9% and 2.5%, rather than by the  increase in the tariffs of services by 5.2%. As a comparison, we note  that a year earlier, in January-August 2022 to January-August 2021,  the main impact on inflation was exerted by a double-digit increase  in prices for food products - by 13%, and to a slightly lesser extent  an increase in prices for non-food products by 6.7% and an increase  in tariffs for services by 4.1%.

In August 2023 alone, inflation amounted to 0.1% (against  deflationary 1% in July of this year and 0.2% in August 2022),  provoked by a rise in prices for non-food goods by 0.6% and an  increase in tariffs for services by 0.4 %, while the price of food  products fell by 0.3%, which almost repeated last year's indicators,  when a decrease in the price of food products by 0.2% was accompanied  by an increase in prices for non-food products by 0.4% and an  increase in tariffs for services by 0.6%.

Among food products, the most noticeable y-o-y decline in price  (August 2023 to August 2022) was for  sunflower oil - by 36.8%,  buckwheat - by 28.4%, lentils - by 22.6%, peas - by 16.3%, margarine  - by 16.3%, flour - by 18.3%, pork - by 13.6%, pasta - by 12.2%.  Against this background, the price of granulated sugar decreased very  slightly - by 4.7%, trout - 4.7%, butter - by 3.9%, vegetables and  fruits - by 3.7-3.3%, milk - by 3.1%, lamb - by 2.6%, chicken - by  0.8%.  In parallel with this, the prices of eggs increased annually  by 13.5% and alcoholic drinks by 6.2%. Cigarettes increased in price  by 11.1% per annum.

In the non-food market, on y-o-y terms (August 2023 to August 2022),  prices for dishes and kitchen utensils increased by 6.9%, shoes by  6.8%, office supplies by 6.3%, small household electrical appliances  by 5.5 %, furniture - by 5.1%, disposable household goods - by 4.7%,  clothing - by 4.3%. In parallel with this, prices for gardening  equipment decreased - by 2.1%

Gasoline and diesel fuel fell in price year-on-year by 5.2% and  23.2%, respectively, while a year earlier both gasoline and diesel  fuel rose in price by 6.5% and 37.9% respectively. For January-August  this year alone, gasoline rose in price by 11.7%, and diesel fuel  fell in price by 12.3%, while in the same period last year the price  of diesel fuel increased by 29.9%, and the cost of gasoline increased  by only 0.4%.

As for tariffs for services, double-digit y-o-y growth is maintained  in the transport sector - by 12.5%, the organization of sports and  entertainment events - by 10.4%, the field of comprehensive services  for recreation - by 10.3%, and slightly less in the field of culture  - by 7.2%. It is also worth noting that tariffs for medical services  have accelerated in y-o-y growth from last year's 2.7% to the current  5.8%. Dry cleaning and clothing repair services, as well as clothing  rental salons, increased in price on y-o-y terms by 5.8%, and shoe  repair increased in price by 6.2%.

August inflation in the consumer market of 0.1% was accompanied by a  revaluation of the dram against the dollar by 0.1% (against inflation  of 0.2% and revaluation of the dram against the dollar by 1.3% in  August 2022). In January- August 2023, deflation in the consumer  market of 3.2% was accompanied by a revaluation of the dram against  the dollar by 2.1% (against inflation of 5% and a revaluation of the  dram against the dollar by 16.4% a year earlier). In August 2023, by  August 2022, the dram revalued against the dollar by 4.8% - to 386.2  AMD/$1 with deflation of 0.2% (vs. 405.8 AMD/$1 a year earlier, with  a revaluation of 17.5%, with inflation at 9.1%).

According to the June forecast of the Central Bank of the Republic of  Armenia for 2023, a strong decrease in inflation is expected to 0.4%  (December/December 2022) from 8.3% in 2022. Moreover, averagey-o-y  inflation will also decrease - to 2.2% (January-December to  January-December 2022) from 8.6% in 2022. But according to the  Central Bank's forecast, in the next two years, both indicators will  increase to 3.5% and 2.8% in 2024 and to 3.9% and 3.7% in 2025,  coming very close to the target level of 4%. As a comparison, we note  that in pre-Covid 2019, inflation was also at a very low level -  0.7%, also significantly moving away from the target 4%.