Sunday, October 18 2020 23:36
Karine Melikyan

The real effective exchange rate of the dram in August fell by 0.6%,  with an annual growth of 2.4%

The real effective exchange rate of the dram in August fell by 0.6%,  with an annual growth of 2.4%

ArmInfo. In August 2020, the real effective exchange rate of the dram to the basket of currencies of the states - the main trading partners of Armenia decreased by  0.6%, and the nominal effective exchange rate - by 0.3%, thereby  fixing a slight weakening of the national currency.

As evidenced by the summary of derivative indicators of the exchange  rate dynamics published by the RA Central Bank, at the end of August  2020, the indices of the real and nominal effective rates (1997 =  100) were 145.74 and 317.20, respectively.  But the annual (August  2020 to August 2019) growth of these indices - real by 2.4% and  nominal by 4.2% - meant the strengthening of the national currency.  This is evidenced by the eight-month dynamics (January- August 2020)  of these indices with the corresponding growth of the real and  nominal effective exchange rates by 1.4% and 5%. Moreover, in the  first 5 months (January-May) the growth of indices of real and  nominal effective exchange rates was recorded by 7.4% and 6.3%, after  which in June-August their decline was observed by 5.6% and 1.2%.   Note that in the retail foreign exchange market of Armenia, by the  end of August 2020, the AMD exchange rate against the dollar was  487.5 AMD / $ 1, against the euro - 581 AMD / 1 euro, against the  Swiss franc 540 AMD / 1 franc, and against the Russian ruble - 6.6 dr  / 1 ruble. In annual and eight-month terms, the dram depreciated  against the dollar by 2.4-1.7%, against the euro - by 10.5-9.4%,  against the Swiss franc - by 12.5-11.1%, while strengthening against  the ruble by 8.3-14.3%. And by the end of September 2020, the AMD  exchange rate against the dollar was 488.5 AMD / $ 1, against the  euro - 572 AMD / 1 euro, against the Swiss franc 528 AMD / 1 franc,  and against the Russian ruble - 6.2 AMD / 1 ruble, with annual and  nine-month devaluation against the dollar by 2.7-1.9%, against the  euro - by 10-7.7%, against the Swiss franc - by 10.5-8.6%, while  strengthening against the ruble by 16.2-19.5% ... In October, the  dram continued to weaken against these currencies, and even  devaluation sentiment against the ruble was outlined.  It should be  reminded that the monthly summary of the Central Bank of Armenia of  the derived indicators of the exchange rate dynamics represents the  real and nominal effective exchange rates of the dram against the  basket of currencies of 12 states - the main trade partners of  Armenia. In calculations, since January 2018, the data on the Islamic  Republic of Iran (IRI) have been revised, in particular, the rate of  the Iranian rial began to be indicated according to the foreign  exchange market data (instead of the previously used official rates  of the Central Bank of Iran), and in the calculations of the consumer  price index (CPI), data from the statistical service of the IRI were  used ...  The nominal effective exchange rate (NEER) is an exchange  rate index calculated as the ratio between the national currency and  the currencies of the main trading partners, weighted in accordance  with their share in the foreign exchange transactions of the given  state. And the real effective exchange rate (REER) is the ratio  between the national currency and the currencies of other countries,  weighted in accordance with the specific weight of foreign exchange  transactions of a given country in foreign trade, adjusted for the  price level. The growth of these indices means the strengthening of  the exchange rate, while the decline means devaluation. An increase  in the real effective exchange rate of the national currency leads to  a deterioration in the competitive position: exports become more  expensive and imports are cheaper.  According to the Statistical  Committee of the Republic of Armenia, in the consumer market in  August 2020 deflation was recorded at 0.1%, with annual inflation at  1.8%, and in January-August of this year. deflation was 1.2%.  Moreover, in August, the decline in prices was provoked exclusively  by the reduction in prices for food products, on an annualized basis,  the rise in prices came to a greater extent from the food group and  slightly less from tariffs for services, and in January-August, the  decline in prices was dictated by food and non-food products. In  September 2020, the deflationary environment remained: 0.2% over the  month (with annual inflation of 1.4%), over 9 months - 1.4%, and this  was mainly provoked by changes in food prices.  The monthly dynamics  of foreign trade turnover showed a subsidence from the February  double-digit growth (17%) to the same decline in March-April (16.8%),  after which in May it was possible to partially restore the previous  growth (14.6%) and maintain it in June (14.9%), however, in July, the  uptrend slowed down strongly (to 3.3%) with weak signs and will  accelerate in August (to 5.8%). The annual trend of foreign trade  turnover in all months, with the exception of January, turned out to  be downward, with a double-digit decline in March (13.3%), April  (27.8%), May (16.2%) and July (13.6%). ).  The main buyers of  Armenian goods in January-August 2020 are Russia - 24.8% in exports,  Switzerland - 22.4%, China - 9.5%. Moreover, Russia and China are  also the main suppliers of imported products to Armenia - 33.6% and  14.4%, respectively, and Iran is in third place - 7.1%. In the  structure of Armenia's foreign trade turnover, Russia accounted for  30.4%, China - 12.7%, Switzerland - 8.2%, Iran - 5.8%. Of these, only  Iran kept both exports and imports in growth, while Switzerland and  China, having increased their exports in double digits, reduced  imports, and Russia, while maintaining imports in growth, reduced  exports in double digits. As a result, Armenia's foreign trade  turnover with these countries was in growth in the direction of  Switzerland and Iran, and with Russia and China went into recession. 

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