CBA Head: Final victory has not yet been won in fight against  inflation

ArmInfo."Certain processes in the service sector lead us to believe that we have not yet won a  final victory in the fight against inflation," Governor of the Central Bank of Armenia, Martin Galstyan said during a press conference today.

"If in the context of goods we see a decrease in prices, then in the  service sector inflation is above the target threshold. In  particular, for certain types of services, inflation ranges from 6%  to 12%, due to high external demand, as well as rising wages in our  country," he said. In this regard, the head of the Central Bank  stressed that wage growth rates in a number of areas outstrip not  only real GDP growth rates, but also productivity, and this carries a  high potential for inflation. Galstyan, in particular, noted that  non-residents who moved to work in Armenia in the IT field receive  high wages.

Martin Galstyan mentioned inflationary expectations, which remain at  a high level, as another reason for concern. As he said, combining  all these factors, the Board of the Central Bank decided to leave the  refinancing rate unchanged, hoping that this would have a restraining  effect on external demand. "As a result, with the expiration of time,  we will see a reduction in prices for services, which will allow us  to return to an expanded monetary policy," the head of the Central  Bank noted.

He assured that the Regulator will continue to take steps and create  conditions to bring inflation closer to the target threshold (4%) in  the medium term.

According to statistics in March 2023, the official y-o-y inflation  in the consumer market of Armenia decreased to 5.4% from the y-o-y  inflation rate of 7.4% in March 2022. And the core y-o-y inflation  calculated by the Central Bank in March 2023 decreased to 6.4% from  the y-o-y inflation rate of 7% in March 2022.  According to  statistical data, in January-March 2023 compared to the same period  in 2022, the industrial products price index decreased by 0.4%, and  by 0.7%, in March alone, and by 2.7% in March 2023 compared to March  2022.  A year earlier, in comparable periods, the industrial products  price index showed an increase: by 11.3% per annum in January-March  2022, by 2%in March, by 12.5% compared to March 2021.  According to  the March forecast of the Central Bank, inflation in 2023 will  decrease to 4.4% (from the actual 8.6% in 2022), with stabilization  at the target level (4%) in the next two years. At the same time,  regarding GDP for 2023, the Central Bank forecasts a slowdown in  growth to 5.8% (from actual 12.6% in 2022), with continued losses in  rates in the next two years - up to 5.2% in 2024 and up to 4.9% in  2025.