Tuesday, May 4 2021 19:14
Alina Hovhannisyan

Central Bank considers it necessary to gradually neutralize the  stimulating effect of monetary conditions

Central Bank considers it necessary to gradually neutralize the  stimulating effect of monetary conditions

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). 

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