ArmInfo.In the long term, aggregate demand indicators in Armenia will remain weak, and in these conditions, inflationary pressures cannot be accelerated, so by the end of the year we will return to the permissible inflation range of 4% (+/- 1.5%).
This was stated by the Deputy Chairman of the Central Bank of Armenia Nerses Yeritsyan during the sitting of the Standing Committee of the National Assembly of the Republic of Armenia on Financial-Budgetary Issues.
"Based on the development of the situation in the financial markets, including the foreign exchange markets, we see that weak demand forces us to be extremely attentive to the conduct of monetary policy, and its gradual recovery remains an extremely important aspect from the point of view of anchoring long- term inflationary expectations", he noted.
The Deputy Chairman of the Central Bank recalled that in the third quarter of 2020, inflation remained low in the country, therefore, monetary policy had to remain expansive until demand in the economy recovered. In the Q4, despite the fact that inflation was below the target, in the range of 1.4% -2.6%, according to Yeritsyan, inflation began to accelerate, especially natural inflation. External shocks led to the fact that, despite the low inflation rate, the regulator slightly raised rates. Speaking about the current account, Yeritsyan noted that the latter continues to improve, calling this factor favorable from the point of view of financial stability. However, he did not rule out that in parallel with the recovery of economic growth and demand, a deterioration in the current account should be expected. To remind, Fitch forecasts that short-term inflation in Armenia will be moderate by the second half of this year, and will average 3.5% in 2021, which is slightly below the target threshold of 4%. At the same time, Fitch expects the Central Bank to tighten monetary policy further in 2021 to contain inflation.
According to the WB forecasts, average inflation in Armenia will remain in 2021 near the target threshold of 4%, but may rise sharply if the unexpected rise in world food and fuel prices continues. The IMF expects inflation in the RA to peak in the first half of 2021 and then decline to about 4% by the end of the year, with the temporary impact of import food inflation and recent currency depreciation disappearing. According to the baseline scenario, the EDB predicts inflation in Armenia at 4.8%. To note, in the consumer market of Armenia in 2020, inflation turned out to be higher - 3.7%, than in 2019 - 0.7%. This was largely provoked by an increase in the prices of food products (including alcohol and cigarettes) by 5.5% (versus 0.2% in 2019), and non-food products - by 3.4% (versus 1.4% in 2019) with an increase in tariffs for services by 1.6% (versus 1.1% in 2019). According to the Statistical Committee of the Republic of Armenia, the average monthly increase in consumer prices in January-December 2020 amounted to 0.3%, against an increase of 0.1% in 2019. At the same time, inflation in the consumer market of Armenia in the first quarter of 2021 was recorded at 3.8% against last year's 1.7%. In the first quarter of this year inflation was mainly provoked by the rise in prices for foodstuffs by 6% and non-foodstuffs by 4.3%, with an increase in tariffs for services by 0.9%.