12-MONTH INFLATION TO EXCEED PLANNED 3% IN 3RD QUARTER OF 2006

Arka News Agency, Armenia
Sept 6 2006

YEREVAN, September 6. /ARKA/. At the end of the 3rd quarter of 2006,
12 -month inflation is expected to exceed the planned 3%, says a
protocol of the sitting of the Board of the Central Bank of Armenia
(CBA) "On refinancing rate".

Among the risks and inflationary pressures are both internal and
external factors. Concerning the external factors, the protocol says
that in August the trends formed early in 2006 – USD devaluation
against the EURO (5.1% in August 2006 compared to August 2005),
high rates of rise in prices for raw materials, particularly for oil
(26.8%) – were maintained.

Among internal risks is setback in agricultural production, which
forms serious inflationary pressures on the consumer market.

Besides, the increase in cash incomes has influenced the price for
nonfoods and services. The CBA Board believe that further influence
should be expected.

The CBA Board members also attach importance to the fact that huge
on-budget expenditures expected before the end of the year, especially
during the last few months, will cause an inflation rise, which will
be evident in the first half 2007. This phenomenon, accompanied by the
aforementioned factors, will cause considerable inflationary pressures.

According to the protocol, 7.2% inflation was recorded in August
2006 compared to August 2005. An 8% rise in prices for food products
(alcoholic beverages and tobacco inclusive) was recorded. A 5.3%
rise in prices for nonfoods and a 4.5% rise in prices for services
were recorded. 2.7% inflation was recorded compared to December 2005,
and 0.9% inflation compared to July 2006.

The highest inflation (compared to August 2006) was recorded in such
groups of products as sugar (35.2%), fruit (25.2%), and vegetables
and potatoes (49.2%). Since the beginning of 2006, the price for
these products has risen by 30.7%, 7.9% and 8.4%.

As regards nonfoods, the highest rise in prices for jewelry was
recorded (31.9%), for gardening implements (23%), for personal cars
and petrol (8.8%), for building materials (5.7%). Since the beginning
of 2006, the highest inflation was recorded in the following services:
shoe repair (5.1%), medical service (6.9%) and communication (10.6%).

A 20.4% rise in the USD import prices was recorded in the 2nd quarter
of 2006 compared to the corresponding period of 2005. The prices for
both consumer goods and for raw materials rose as well.

3% inflation is budgeted in Armenia this year.