ArmInfo.The current development of the Armenian economy indicates weaker than predicted activity, mainly due to a downturn in the agricultural sector and the expected slowdown in service sector growth due to a new wave of the pandemic. This is stated in the message of the Central Bank of the Republic of Armenia, which substantiates in detail the decision taken on November 2 to maintain the refinancing rate at 7.25%.
Nonetheless, positive demand dynamics persist, which continues to be largely driven by private consumption as a result of the large volume of remittances from abroad and the decline in private savings. In these conditions, according to the Central Bank Council, the growth of private consumption, which is still progressing in comparison with the expansion of production potential, continues to contribute to the preservation of demonstrating signs of stabilization.
The recovery of economic activity and gross demand continues In the main partner countries of Armenia, despite the rather rapid pace of the spread of the new strain of coronavirus in the world, in which conditions the active use of vaccines is taking place, so as not to resort to severe restrictions, if possible. Against the background of the positive development of demand, mainly due to factors limiting supply, a significant expansion of the inflationary environment is observed on the international markets for raw materials and food products, which is also reflected in the acceleration of inflation in the partner countries of the Republic of Armenia. And as a result, the inflationary impact from the external sector on the Armenian economy remains.
In September 2021, deflation was recorded at 0.1% (against deflationary 0.2% in September 2020), and annual inflation, according to statistics, was 8.9% at the end of the month. At the same time, real inflation, according to the Central Bank of Armenia, in September 2021 by the same month of 2020 stabilized at the level of 8%.
The CB Council believes that, despite the continued inflationary impact in the Armenian economy and in the external sector, the future-oriented tightening of monetary conditions, which began at the end of last year, has a sufficient impact on the regulation of progressive demand, curbing inflation and ensuring it in the medium term at the target threshold. In this regard, the Central Bank Council considered it expedient to leave the refinancing rate unchanged for now (at 7.25%). In such conditions, it is predicted that 12-month inflation will be at a high level by the end of this year, then in 2022 it will approach the target level of 4%, and will stabilize near this threshold in the medium term.
The Council of the Central Bank, assessing that the risks of inflation deviating from the medium-term rate, predicted in the conditions of the continuing uncertainty of economic prospects, are balanced, and, if they occur, is ready to react appropriately to ensure price stability.
