Tuesday, April 27 2021 17:22
Alina Hovhannisyan

Deputy Chairman of Central Bank of Armenia: By the end of the year we  will return to the permissible inflation range

Deputy Chairman of Central Bank of Armenia: By the end of the year we  will return to the permissible inflation range

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%. 

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