Tuesday, May 3 2022 18:51

Central Bank of Armenia: There is still high uncertainty in terms of  macroeconomic prospects

Central Bank of Armenia: There is still high uncertainty in terms of  macroeconomic prospects

ArmInfo.There is still high uncertainty in terms of macroeconomic prospects due to geopolitical developments. At the same time, the risks of inflation deviating from  the projected vector are generally balanced, but in the event of  their sharper direction, the Central Bank will react properly to  ensure price stability.

On May 3, head of the Central Bank of Armenia  Martin Galstyan told journalists at a press conference amid the  decision of the regulator to leave the refinancing rate unchanged.

It should be noted that at its today meeting, the CBA Board decided  to leave the refinancing rate unchanged, setting it at 9.25%. In  March 2022, 12-month inflation grew to 7.4%. 12-month core inflation  grew as well, totaling 7.0%, (against 5.8% and 6.6% per annum,  respectively, in March 2021, ed. note).

As the CBA reports, "The Russian-Ukrainian conflict continues, and  the uncertainties related to it remain. This has a negative impact on  the economic and financial market developments in the main partner  countries of Armenia. The slower-than-expected slowdown in economic  growth in partner countries is accompanied by an expansion of the  inflationary environment. The latter is the result of value chain  disruptions and accelerated inflation in international commodity  markets. Thus, inflationary impact on the Armenian economy from the  external sector will persist.

In the first quarter of 2022, developments in the economic activity  of the Republic of Armenia were more positive than expected. The  significant influx of international visitors is reflected in the high  growth of the service sector and the expansion of aggregate demand.  It contributes to the improvement of the Republic of Armenia external  balance and appreciation of Armenian dram in foreign exchange market.  It is estimated that the latter will also have a positive impact on  weakening the domestic inflationary environment and lowering  inflation expectations.  In view of the above, the Board judges  appropriate to leave the refinancing rate still unchanged. The CBA  Board is committed to take adequate measures to neutralize any  possible risk of deanchoring of inflation expectations. It is  projected that the 12-month inflation will gradually decline and will  approach the target of 4% in the medium term." The CBA Board  considers that as a result of geopolitical developments the high  uncertainty related to the macroeconomic perspective remains. At the  same time, the risks of inflation deviation from the projected  trajectory are mainly balanced.  Should the risks materialize in any  direction, the Board stands ready to respond accordingly in  fulfilment of the price stability objective. "

We should also note that according to the March forecast of the  Central Bank of the Republic of Armenia, inflation in Armenia will  decrease by the end of 2022 to 6.6% from 7.7% in 2021, with a  subsequent y-o-y decline to the targeted 4% in 2024. 

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