Tuesday, January 31 2023 22:20

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.