Tuesday, August 2 2022 20:11
Alina Hovhannisyan

CBA: High demand leads to the expansion of the inflationary  environment and maintenance of high inflation expectations, but dram  appreciation partially neutralizes the price increase

CBA: High demand leads to the expansion of the inflationary  environment and maintenance of high inflation expectations, but dram  appreciation partially neutralizes the price increase

ArmInfo.On August 2, the Board of the Central Bank of Armenia decided to raise the refinancing rate by 0.25 percentage points to 9.5%. At a press conference on  these issues, Deputy Chairman of the Central Bank of the Republic of  Armenia Nerses Yeritsyan noted that in Q2, disruptions in global  value chains continued, and economic activity in Armenia's key  partner countries is slowing.

According to him, inflationary pressure on the international  commodity market has eased somewhat, but prices remain at  historically high levels. "The central banks of developed countries  continue to tighten monetary conditions. This will gradually curb the  global inflationary environment. Thus, the inflationary impact coming  from the external sector on the Armenian economy will somewhat  weaken, but will still persist in the near future," he noted, adding  that in June 2022 the official y-o-y inflation continued to grow and  reached 10.3% (from 6.5% a year earlier, ed. note), and the core  y-o-y inflation increased in June to 9.4% (from 7.8% a year earlier,  ed. note).

Yeritsyan drew attention to the fact that in Q2 2022, the Armenian  economy showed higher activity - 14% per annum, rather than the  expected 7.1%. "This was especially evident in the service sector,  where monitoring revealed a 19.4% y-o-y growth in Q2, instead of the  expected 9.8%. Positive changes were also registered in the industry  sector and the export of goods and services. In particular, the  monitoring of the industrial sector showed 6.9% y-o-y growth in Q2,  against the expected 1.9%. Tax collection, according to monitoring,  increased in Q2 by 13.2% per annum, against the expected 4% growth.   The construction sector in the reporting quarter showed 22.6% y-o-y  growth, which fully met expectations," Yeritsyan said, noting that in  September the Central Bank will revise the forecast GDP growth in  Armenia for 2022 towards a higher rate from the previous 4.9%. In  doing so, he pointed out that demand-driven factors dominated the  high economic growth: "The latter continues to be largely driven by a  sizable influx of international visitors and remittances from Russia.   High demand leads to an expansion of the general inflationary  environment and maintaining high inflationary expectations,"  Yeritsyan said, noting that the revaluation of the Armenian dram  partially neutralizes the inflation growth.  In this situation, the  Board of the Central Bank considered it expedient to raise the  refinancing rate this time. To stabilize inflation and neutralize any  risk of anchoring inflationary expectations, the Central Bank Board  will consistently take the necessary steps. Under the scenario  envisaged in the monetary policy, y-o- y  inflation will gradually  decrease and in the medium term will approach the target threshold of  4%.

"According to the assessment of the Central Bank Board, the  uncertainty associated with macroeconomic prospects remains. At the  same time, the risks of inflation deviating from the planned  trajectory are basically balanced. In case of risks of any direction,  the Central Bank Board will react properly to ensure price  stability," he concluded.

It is worth noting that in 2022 this is already the third increase in  the refinancing rate, the previous two took place in February - from  7.75% to 8% and in March - to 9.25%, after which it remained at this  level for 4.5 months. And from 2021 to this day, there have been nine  increases in the refinancing rate - in total from 5.25% to 9.5%. It  is also worth noting that in 2022 this is already the third increase  in the refinancing rate, the previous two took place in February -  from 7.75% to 8% and in March - to 9.25%, after which it remained at  this level for 4.5 months. And from 2021 to this day, there have been  nine increases in the refinancing rate - in total from 5.25% to 9.5%.   In accordance with the August increase in the refinancing rate, the  Lombard repo facility rate was increased by 0.25 percentage points -  from 10.75% to 11%, and the Deposit facility rate - from 7.75% to 8%.

The forecast of the Central Bank, updated at the end of June,  foreshadowed inflation at the level of 8.5% for 2022 (against the  actual 7.7% in 2021), with the target of 4% approaching in 2024.  Furthermore, the CBA's forecasts have changed compared to the March  version of the report, in particular, in terms of inflation, instead  of the previously expected 6.6% in 2022, the updated June version has  a higher level of 8.5%, and the projected GDP growth, on the  contrary, has improved from the previous 1.6% to the updated 4.9%.

The June 2022 forecast reflects new challenges against the backdrop  of the Russian-Ukrainian military-political conflict and  comprehensive, unprecedented, large-scale US and European sanctions  against Russia, the share of which  in the main macroeconomic  indicators of Armenia dominates.

According to the Central Bank of the Republic of Armenia, the share  of Russia in the inflow  in H1 2022 incresed to 60.5% from 39.6% in  H1 2021 (vs. 32.7% in H1 2019). And the share of the United States,  on the contrary, decreased both in inflow- in y-o-y terms from 27.4%  to 17% (against 14.7% in H1 2019), and in outflow from 16.3% to 14.7%  (against 20 .4% in H1 2019).  It is appropriate to note that the  surge in transfers from Russia to Armenia was provoked by the massive  arrival of Russians along with the transfer of their capital.   Moreover, on monthly terms, a significant increase in the net inflow  of transfers from Russia began to be observed already in February (a  3-fold increase), continuing to grow at a rapid pace in the following  months. Such an increase in transfers is explained by the arrival of  a huge number of Russians in Armenia who, due to the  Russian-Ukrainian conflict and anti-Russian sanctions applied by the  West (including disconnection from the S.W.I.F.T., withdrawal of Visa  and MasterCard from the market, blocking of Western social networks)  faced difficulties in work, financial and card transactions in their  homeland.

In confirmation of the aforementioned, experts cite statistics of  companies opened in Armenia in April-May, the number of which has  increased significantly after the arrival of the Russians, and most  of them, in order to avoid anti-Russian sanctions, migrate and move  their capital. "In addition to business purposes, Russians spend  money in Armenia on recreation, entertainment, rental housing, etc.   These funds, in turn, spur growth especially in the service sector,  as well as in the real estate market and the trade sector.  As a  result, an increase in economic activity in Armenia in the first half  of the year by 11.8% per annum, to a greater extent came from the  growth of the service sector by 26.9%," experts say, stating with  confidence that this increase is caused by the arrival of such a  large number of Russians. But how long the growth of remittances and  how long-term - the stay of Russian citizens will be in Armenia,  according to experts, depends on the outcome of the Russian-Ukrainian  conflict and the West's mood to ease sanctions against Russia. 

POST A COMMENT
Input digits     


News
Termination of service of MIR cards. IDBankTermination of service of MIR cards. IDBank
Economic modernization programme portfolio AMD 228bln as of March 1,  2024Economic modernization programme portfolio AMD 228bln as of March 1,  2024
Mobile trade regulations to be in effect throughout Armenia Mobile trade regulations to be in effect throughout Armenia 
Official cites financial reasons for suspension of Fly Arna airline  operation Official cites financial reasons for suspension of Fly Arna airline  operation 
Subsidiary of Public TV of Armenia to have right to nationwide  broadcasting  Subsidiary of Public TV of Armenia to have right to nationwide  broadcasting  
About 700 Armenian heavy cargo trucks waiting to pass through Upper  LarsAbout 700 Armenian heavy cargo trucks waiting to pass through Upper  Lars
Armenian Economy Ministry, several U.S. government departments form  specific action program Armenian Economy Ministry, several U.S. government departments form  specific action program 
Public TV`s First News Channel to be broadcasted not only in Yerevan,  but also throughout countryPublic TV`s First News Channel to be broadcasted not only in Yerevan,  but also throughout country
Ardshinbank cardholders can now enjoy a 10% cashback!Ardshinbank cardholders can now enjoy a 10% cashback!
“G20/OECD Principles of Corporate Governance” workshop“G20/OECD Principles of Corporate Governance” workshop
ECC, EDB to coordinate funding of joint projects ECC, EDB to coordinate funding of joint projects 
Broadcasting of Russian TV channels to be discussed in Moscow soon Broadcasting of Russian TV channels to be discussed in Moscow soon 
Armenia to host World Wine Tourism Conference,Armenia to host World Wine Tourism Conference,
CBA forecasts 5.5% or 6.4% GDP growth for 2024 depending on inflation  rate  CBA forecasts 5.5% or 6.4% GDP growth for 2024 depending on inflation  rate  
Three Sad Stories about FraudstersThree Sad Stories about Fraudsters
Rafayel Gevorgyan: Armenia`s economic growth potential is 6%Rafayel Gevorgyan: Armenia`s economic growth potential is 6%
TEAM already has over 1 million mobile subscribersTEAM already has over 1 million mobile subscribers
Armenia`s ministry of economy proposes new SAFE format Armenia`s ministry of economy proposes new SAFE format 
CBA Governor: Over 11 thousand Artsakh refugees employed in ArmeniaCBA Governor: Over 11 thousand Artsakh refugees employed in Armenia
Armenian economy is approaching neutral interest rate level- Martin  GalstyanArmenian economy is approaching neutral interest rate level- Martin  Galstyan
CBA: external inflationary impact on Armenian economy continues to  weaken significantlyCBA: external inflationary impact on Armenian economy continues to  weaken significantly
Martin Galstyan: It`s too early to talk about threat of overheating  in consumer lending marketMartin Galstyan: It`s too early to talk about threat of overheating  in consumer lending market
Non-cash transactions surpass cash ones in Armenian plastic card  marketNon-cash transactions surpass cash ones in Armenian plastic card  market
CBA reduces refinancing rate by 0.25 pp. setting it at 8.5%CBA reduces refinancing rate by 0.25 pp. setting it at 8.5%
After construction of alternative route, Lars to become passable all  year round - Deputy MinisterAfter construction of alternative route, Lars to become passable all  year round - Deputy Minister
3,780,052 Drams to the City of Smile Fund: The Power of One Dram Will Go to My forest Armenia in March3,780,052 Drams to the City of Smile Fund: The Power of One Dram Will Go to My forest Armenia in March
Global Finance Recognizes Ameriabank`s Leadership in Sustainable Finance in ArmeniaGlobal Finance Recognizes Ameriabank`s Leadership in Sustainable Finance in Armenia
Project to create unified gas market in EAEU postponed until 2027Project to create unified gas market in EAEU postponed until 2027
Amounts exceeding maximum social payments from several sources to be  returned to individualsAmounts exceeding maximum social payments from several sources to be  returned to individuals
Finance Minister considers leaving EAEU riskyFinance Minister considers leaving EAEU risky
Gevorg Papoyan: There cannot be systemic corruption in Ministry of  EconomyGevorg Papoyan: There cannot be systemic corruption in Ministry of  Economy
Minister of Economy: I see no objective reasons for closure of Upper  Lars to Armenian goodsMinister of Economy: I see no objective reasons for closure of Upper  Lars to Armenian goods
Araratbank plans to implement ESG risk management strategy with  environmental, social and corporate management Araratbank plans to implement ESG risk management strategy with  environmental, social and corporate management 
Well-being and future are impossible without compliance with ESG -  Araratbank rep Well-being and future are impossible without compliance with ESG -  Araratbank rep 
Armenia should completely switch to renewable energy - Jon Dee Armenia should completely switch to renewable energy - Jon Dee 
Connection with Europe via Georgia Armenia`s energy priority -  officialConnection with Europe via Georgia Armenia`s energy priority -  official
Half Price for Everyone and up to AMD 15.000 Welcome Bonus for New Customers. IDBankHalf Price for Everyone and up to AMD 15.000 Welcome Bonus for New Customers. IDBank
Armenia`s economic activity increased by 10.7% per annum in Jan 2024Armenia`s economic activity increased by 10.7% per annum in Jan 2024
Deputy PM: there is need to review current water resources management  policyDeputy PM: there is need to review current water resources management  policy
Armenia`s premier meets with Egyptian businessmen Armenia`s premier meets with Egyptian businessmen 
Hovak Hovakimyan: We should not limit ourselves to domestic market in  development of Armenia`s capital marketHovak Hovakimyan: We should not limit ourselves to domestic market in  development of Armenia`s capital market
Garegin Gevorgyan: Armenia can become trading hub for foreign  securitiesGaregin Gevorgyan: Armenia can become trading hub for foreign  securities
Doing Digital Forum Returns Featuring Brett King as Keynote SpeakerDoing Digital Forum Returns Featuring Brett King as Keynote Speaker
Decline in Armenia`s consumer prices was caused by food products;  while prices for services and gasoline were on riseDecline in Armenia`s consumer prices was caused by food products;  while prices for services and gasoline were on rise
FLYONE ARMENIA offers number of new destinations this summerFLYONE ARMENIA offers number of new destinations this summer
Gevorg Papoyan appointed Armenia`s minister of economyGevorg Papoyan appointed Armenia`s minister of economy
Samvel Khanvelyan: Armenia`s domestic debt market is Samvel Khanvelyan: Armenia`s domestic debt market is "limping" in  terms of investment base and structure 
Armenian capital market is at its initial stage of development -  Deputy MinisterArmenian capital market is at its initial stage of development -  Deputy Minister
Armenia should be among world leaders in a number of technological  areas - expertArmenia should be among world leaders in a number of technological  areas - expert
Google Pay is now accessible for Armswissbank Mastercard cardholdersGoogle Pay is now accessible for Armswissbank Mastercard cardholders
Number of vPOSs in Armenia already exceeds 4.5 thousandNumber of vPOSs in Armenia already exceeds 4.5 thousand
2-3 nuclear power units with capacity of 200 MW each would make it  possible to more effectively manage country`s energy system - PSRC  Chair2-3 nuclear power units with capacity of 200 MW each would make it  possible to more effectively manage country`s energy system - PSRC  Chair
ADB to provide  $3 million grant to Armenia to increase agricultural  flexibility and improve food security in rural areasADB to provide  $3 million grant to Armenia to increase agricultural  flexibility and improve food security in rural areas
By accepting 20% stake in MTS Armenia as gift, government sends  message to other companies:  PashinyanBy accepting 20% stake in MTS Armenia as gift, government sends  message to other companies:  Pashinyan
Micro-processing cards with NFC chip account for almost 70% of total  number of cards in Armenia, already reaching 2.6 millionMicro-processing cards with NFC chip account for almost 70% of total  number of cards in Armenia, already reaching 2.6 million
A Millionaire Wanted: New Draw from IdramA Millionaire Wanted: New Draw from Idram
PSRC: construction of Mets Masrik  industrial-scale solar power plant  in Armenia is nearing completionPSRC: construction of Mets Masrik  industrial-scale solar power plant  in Armenia is nearing completion
Wizz Air launches Budapest-Yerevan-Budapest direct flights Wizz Air launches Budapest-Yerevan-Budapest direct flights 
Temporary ban on gasoline exports from Russia will not affect ArmeniaTemporary ban on gasoline exports from Russia will not affect Armenia
14 Armenian tech companies participate in Mobile World Congress in  Barcelona14 Armenian tech companies participate in Mobile World Congress in Barcelona
Read more


Exchange rates
18.03.2024
RUB4.37-0.01
USD401.96-0.67
EUR438.10-0.36
GBP511.98-1.33
CAD296.82-0.70
JPY26.96-0.10
CNY55.84-0.11
CHF455.17-0.60