ArmInfo. Taking into account the current macroeconomic situation and the inflationary impact expected from the external and internal economies, the Council of the Central Bank of Armenia considers it necessary to gradually neutralize the stimulating effect of monetary conditions.
Thus, on May 4, the Central Bank of the Republic of Armenia decided to raise the refinancing rate by 0.5 percentage points - from 5.5% to 6%. The Chairman of the Central Bank of the Republic of Armenia Martin Galstyan presented a detailed justification of this decision on May 4 at a press conference.
He said that monetary policy will be consistent in neutralizing the risks of accelerating inflation expectations, without damaging the recovery in domestic demand if possible. "In such conditions, it is predicted that annual inflation, after a certain acceleration in the short term, will gradually decrease and in the forecast horizon will stabilize near the target threshold of 4%," he said. At the same time, he noticed that in March 2021 inflation amounted to 1% (against 0.5% in March 2020), and annual inflation increased to 5.8%, and annual real inflation also accelerated, reaching 6.6% by the end of March.
According to him, in the first half of 2021, in the main partner countries of Armenia, as a result of the stimulating policy and certain positive results of the use of vaccines against coronavirus, trends of a faster than expected recovery of economic activity and gross demand are recorded. "Under the influence of positive expectations of a recovery in global demand and a number of supply factors, high inflation continues to be observed in the international commodity and food markets, which is also reflected in the formation of an inflationary environment in partner countries. In such a situation, the Central Bank Council continues to expect inflationary influence from the external sector on economy of Armenia ", M. Galstyan noted. He drew attention to the fact that in the first quarter of 2021, the development of economic activity in the country outlined more positive trends in comparison with the previous forecasts of the Central Bank. With an increase in global demand and remittances from abroad, as well as a more positive development in lending, aggregate demand will recover at a faster pace than expected, but will remain weak. At the same time, according to the Central Bank's estimates, the society has increased uncertainty regarding the future course of inflation, and to some extent inflationary expectations. As a result, according to the Central Bank Council, certain inflationary influences also appear from the domestic economy.
The Central Bank Council believes that in terms of economic prospects, amid uncertainty, 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 in order to ensure price stability. To note, according to the IMF forecast, GDP growth in Armenia in 2021 will be 1%, and average annual inflation - 3.9%. According to the World Bank's forecast, GDP growth in Armenia in 2021 will amount to 3.4%, inflation - 3.5%. According to the forecast of the Central Bank of Armenia, GDP growth in 2021 will amount to 1.4%. And in the state budget of the Republic of Armenia for 2021, GDP growth is laid down by 3.2%, and inflation at 4% (+/- 1.5).