ArmInfo. Recovery of consumer demand slowed down in Armenia. The completion of the active recovery phase against the background of the gradual exhaustion of deferred demand continues to influence the dynamics of retail trade and accommodation and catering services (growth by 0.1% y / y and 82.8% y / y in August, respectively).
Due to the realization of deferred demand and heightened inflationary expectations, the growth rates of household savings slowed down. Lending to the population weakened (to 1.9% y-o-y compared to 20.5% y-o-y in August of the previous year) amid continued uncertainty in the economic situation, increased interest rates, and weak demand for loans. This is stated in the October analytical macro review of the Eurasian Development Bank (EDB). According to the materials, consumer prices in Armenia rose by 8.9% y -o- y in September after 8.8% y -o- y in August. Inflation accelerated due to higher prices for imported non-food products and high food prices. Pro-inflationary factors continue to be global supply delays and inflationary expectations.
According to the baseline forecast of the EDB, subject to the stability of the dram exchange rate and stabilization of world prices for raw materials, inflation in Armenia is expected to slow down at the end of this year, including due to the tightening of monetary policy. In December, price growth is expected to slow down to 8.0% y -o- y, and by the end of the first half of 2022, the indicator will return to the target interval of the Central Bank of Armenia.
Against the background of a sharp reduction in monetary stimulus due to increased inflation and inflationary expectations, the monetary policy of the Central Bank of Armenia will become neutral in the 4th quarter of 2021. The interbank loan rate, according to the baseline scenario of the EDB forecast, may rise to 7.5-7.75% against the end of this year, following the refinancing rate. According to EDB analysts, the latent force of "covid damage" in the global economy and the strongest influence of monetary policy are such that neutralizing the inflationary impact of these factors may take longer than expected. The risks of inflation fixing at elevated levels are growing. Therefore, EDB analysts admit a further increase in key interest rates in the bank's states by the end of the year. According to the financial analytics service of ArmInfo, in the banking sector of Armenia, after a long decline, interest rates went up since August 2021, which increased the margin of active-passive operations to 5.5-6% from 4.5-5% a year earlier. In August of this year, an increase in interest rates was observed both on loans- up to 10.82% on average (from 9.84% in August 2020), and for deposits - up to 4.8% on average (from 4.72% in August 2020), while in July the rise in the cost of loans from 9.25% to 10.19% was accompanied by a decrease in the cost of deposits from 4.66% to 4.58%.
In January-August of this year, the average interest rate on loans was 10.2%, exceeding the level of a year ago (9.94%), but yielding to the pre-covid 10.44% (January-August 2019). At the same time, the average interest rate on deposits in January-August this year amounted to 4.74%, slightly falling short of last year's 4.8% (January-August 2020), and more noticeably yielding to the pre-covid 5.28% (January-August 2019). It is noteworthy that the yield on government bonds began to show signs of growth a little earlier - already in June, increasing by 1 percentage point every month, reaching the level of 8.95% in August, in particular, for government short-term bonds - 8.29% and mid term ones- 9 , 6%. In January-August of this year, the average yield on government bonds was 7.82%, after falling from 13.40% in 2015 to 6.23% in 2020. In particular, the average yield on short-term government bonds in January-August 2021 amounted to 7.08%, on medium-term - 8.55%, on long-term - 9.82%, after a decrease, respectively, from 12 , 52%, 14.48%, 16.12% in 2015 to 5.70%, 6.85%, 8.62% in 2020.
Note that on September 14, the Council of the Central Bank of Armenia once again raised the refinancing rate - from 7% to 7.25%. In this regard, rates on lombard repo and on deposits attracted from banks were also increased by 0.25% percentage points - to 8.75% and 5.75%, respectively. In 2021, this is the fifth increase in the refinancing rate.
