ArmInfo. The Central Bank expects that the inflationary impact on the Armenian economy emanating from the external sector will weaken. Chairman of the Central Bank of the Republic of Armenia Martin Galstyan stated this on January 31 at a press conference.
He explained that there is still a slowdown in economic activity in the main partner countries of Armenia. World inflation is also declining due to the decline in prices for certain types of raw materials and food products. However, relatively expanded demand is supporting an inflationary environment. Therefore, the central banks of developed countries will continue to tighten monetary conditions in the near future, which will contribute to the weakening of world demand and a certain adjustment in prices on international commodity markets. This will weaken the inflationary impact from the external sector on the Armenian economy.
High economic activity in Armenia, which persisted at the end of 2022, continued to be supported by increased external demand formed in the service sector. In parallel with this, positive trends in the service sector and the industrial sector continued in terms of increasing the potential for exports and GDP. As a result of the ongoing contractionary monetary policy, the strengthening of the dram and the weakening of the inflationary impact from the external sector, the general inflationary environment in Armenia is gradually softening. However, high demand is still reflected in the labor market and pushes up the prices of goods and services, also affecting wages. In this regard, the Board of the Central Bank considered it expedient to leave the refinancing rate unchanged for the time being - at the level of 10.75% (according to the decision of January 31, 2023). The Central Bank Board is consistent in its steps to ensure price stability and neutralize any risk of anchoring inflationary expectations. In the planned monetary policy scenario, annual inflation will gradually decrease and from the second half of 2023 will stabilize near the target threshold of 4%.
According to the Central Bank Council, the risks of inflation deviating from the planned trajectory are basically balanced. If they move in any direction, the Central Bank Board will react accordingly in order to ensure price stability.
It should be noted that in December 2022 in Armenia, the official y-o-y inflation was 8.3% (according to statistical data), and the core y-o-y inflation was 9.5% (according to the Central Bank of the Republic of Armenia), against the y-o-y 7.7% and 7.3%, respectively (official and basic) in December 2021.
