Tuesday, March 16 2021 20:14

ArmInfo.The RA Central Bank continues to expect inflationary influence on the Armenian economy from the external sector. The Chairman of the RA Central Bank Martin Galstyan announced this on March 16 at a press conference.

He explained this by the fact that, under the influence of positive  expectations of a recovery in global demand and a number of supply  factors, price growth trends were recorded on the international  markets for raw materials and food products. "It also contributes to  the formation of a higher than expected inflationary background in  partner countries," he remarked.

The head of the Central Bank of Armenia informed that in the 4th  quarter of 2020, the economic recession in Armenia to some extent  exceeded the level predicted in the previous monetary policy program,  mainly due to the reduction in activity in the service sector and the  agricultural sector. To this, he added that in the first quarter of  2021, low economic activity is still preserved, under the influence  of the continuing decline in the volume of services due to weak  demand and low private consumption.

"Despite a weakly expanded fiscal policy, amid continuing  uncertainties and a slowdown in lending growth, it is predicted that  domestic demand will remain moderate in the near future. In such  conditions, the Central Bank Council does not expect inflationary  impact from the domestic economy," he said.  Back in December, the  Central Bank Council, predicting a certain acceleration of inflation  and inflationary expectations due to supply factors, significantly  tightened monetary conditions (raising the refinancing rate by 1  percentage point - from 4.25% to 5.25%, and later starting from  February 2021 raising by another 0.25 p.p. to 5.5% -ed. note).  The  Council of the Central Bank, taking into account the above and the  continuing weak demand, considered it expedient to keep the  refinancing rate at the same level (at 5.5% - this decision was made  on March 16 this year - ed.  note). 

The Board of the Central Bank is unanimous in the opinion that  monetary policy will be aimed at neutralizing any risk of  accelerating inflation expectations, if possible without prejudice to  the recovery of domestic demand. In such conditions, the Central Bank  predicts that 12-month inflation, after a certain acceleration, will  decrease towards the end of the forecast horizon and stabilize near  the target level of 4%.  The Council of the Central Bank believes  that, in conditions of high uncertainty of economic prospects, the  risks of inflation deviating from the projected medium-term rate are  balanced, and if they occur, the Central Bank is ready to react  accordingly to ensure price stability.

At the same time, it was mentioned that in February 2021 inflation  was recorded at 0.6%, against deflation of 0.2% in February 2020. As  a result, 12-month official inflation and real inflation increased  and by the end of the reporting month amounted to 5.3% and 5.5%,  respectively, which was mainly due to the influence emanating from  international commodity markets and from the depreciation of the AMD.

To note, according to the new forecast of the Central Bank of  Armenia, GDP growth in Armenia for 2021 is underestimated to 1.4%  from the previously expected 2%. And according to the January  forecast of the World Bank, GDP growth in Armenia in 2021 will be  3.1%. The state budget of Armenia for 2021 provides for a GDP growth  of 3.2%. According to the RA Statistical Committee, the decline in  Armenia's GDP in 2021 amounted to 7.6%, in particular, the services  and trade sectors reduced volumes by 14.7-14%, the industrial sector  - by 0.9%, the construction sector - by 9.5%, while the agricultural  sector and the energy complex were in weak growth by 1.4-1.2%.