ArmInfo.Deflation in Armenia is very negligible due to the moderate reduction in food prices and rising prices for services. Moreover, among food products, the prices of sunflower oil, flour, cereals and pasta decreased most noticeably, while vegetables and fruits had a much smaller deflationary effect. At the same time, service tariffs continued to rise, slightly more modestly than last year, with double-digit growth in transportation and recreation, and medical services began to rise more rapidly.
Thus, in August 2023, compared to August 2022, a meager deflation of 0.2% per annum was recorded in the Armenian consumer market (against inflation of 9.1% a year earlier), which was the result of a restrained reduction in the price of food products by 2.7%, with an increase in prices services by 3.6% and in unchanged prices of non-food products, which nevertheless looks better than last year's inflation rates in all three positions - 12%, 6.2% and 8.2%, respectively.
3.2% deflation was also recorded in January-August 2023 (against inflation of 5% a year earlier), provoked by a reduction in the price of food products by 7.6%, non-food products by 1.4%, with an increase in tariffs for services by 1.9 %. As a comparison, we note that in January-August 2022, food products rose in price by 4.4%, non-food products by 5.5%, and tariffs for services increased by 5.5%. And on y-o-y terms (January-August 2023 to January-August 2022), inflation decreased to 3.1% (from last year's 8.4%), which was rather contributed by the increase in the prices of food and non-food products to a small extent, by 1.9% and 2.5%, rather than by the increase in the tariffs of services by 5.2%. As a comparison, we note that a year earlier, in January-August 2022 to January-August 2021, the main impact on inflation was exerted by a double-digit increase in prices for food products - by 13%, and to a slightly lesser extent an increase in prices for non-food products by 6.7% and an increase in tariffs for services by 4.1%.
In August 2023 alone, inflation amounted to 0.1% (against deflationary 1% in July of this year and 0.2% in August 2022), provoked by a rise in prices for non-food goods by 0.6% and an increase in tariffs for services by 0.4 %, while the price of food products fell by 0.3%, which almost repeated last year's indicators, when a decrease in the price of food products by 0.2% was accompanied by an increase in prices for non-food products by 0.4% and an increase in tariffs for services by 0.6%.
Among food products, the most noticeable y-o-y decline in price (August 2023 to August 2022) was for sunflower oil - by 36.8%, buckwheat - by 28.4%, lentils - by 22.6%, peas - by 16.3%, margarine - by 16.3%, flour - by 18.3%, pork - by 13.6%, pasta - by 12.2%. Against this background, the price of granulated sugar decreased very slightly - by 4.7%, trout - 4.7%, butter - by 3.9%, vegetables and fruits - by 3.7-3.3%, milk - by 3.1%, lamb - by 2.6%, chicken - by 0.8%. In parallel with this, the prices of eggs increased annually by 13.5% and alcoholic drinks by 6.2%. Cigarettes increased in price by 11.1% per annum.
In the non-food market, on y-o-y terms (August 2023 to August 2022), prices for dishes and kitchen utensils increased by 6.9%, shoes by 6.8%, office supplies by 6.3%, small household electrical appliances by 5.5 %, furniture - by 5.1%, disposable household goods - by 4.7%, clothing - by 4.3%. In parallel with this, prices for gardening equipment decreased - by 2.1%
Gasoline and diesel fuel fell in price year-on-year by 5.2% and 23.2%, respectively, while a year earlier both gasoline and diesel fuel rose in price by 6.5% and 37.9% respectively. For January-August this year alone, gasoline rose in price by 11.7%, and diesel fuel fell in price by 12.3%, while in the same period last year the price of diesel fuel increased by 29.9%, and the cost of gasoline increased by only 0.4%.
As for tariffs for services, double-digit y-o-y growth is maintained in the transport sector - by 12.5%, the organization of sports and entertainment events - by 10.4%, the field of comprehensive services for recreation - by 10.3%, and slightly less in the field of culture - by 7.2%. It is also worth noting that tariffs for medical services have accelerated in y-o-y growth from last year's 2.7% to the current 5.8%. Dry cleaning and clothing repair services, as well as clothing rental salons, increased in price on y-o-y terms by 5.8%, and shoe repair increased in price by 6.2%.
August inflation in the consumer market of 0.1% was accompanied by a revaluation of the dram against the dollar by 0.1% (against inflation of 0.2% and revaluation of the dram against the dollar by 1.3% in August 2022). In January- August 2023, deflation in the consumer market of 3.2% was accompanied by a revaluation of the dram against the dollar by 2.1% (against inflation of 5% and a revaluation of the dram against the dollar by 16.4% a year earlier). In August 2023, by August 2022, the dram revalued against the dollar by 4.8% - to 386.2 AMD/$1 with deflation of 0.2% (vs. 405.8 AMD/$1 a year earlier, with a revaluation of 17.5%, with inflation at 9.1%).
According to the June forecast of the Central Bank of the Republic of Armenia for 2023, a strong decrease in inflation is expected to 0.4% (December/December 2022) from 8.3% in 2022. Moreover, averagey-o-y inflation will also decrease - to 2.2% (January-December to January-December 2022) from 8.6% in 2022. But according to the Central Bank's forecast, in the next two years, both indicators will increase to 3.5% and 2.8% in 2024 and to 3.9% and 3.7% in 2025, coming very close to the target level of 4%. As a comparison, we note that in pre-Covid 2019, inflation was also at a very low level - 0.7%, also significantly moving away from the target 4%.