PRESIDENTIAL ADVISOR ADMITS HIGH LEVEL OF MONOPOLIZATION OF ARMENIAN ECONOMY AND FORECASTS 5% INFLATION

ARMINFO News Agency, Armenia
September 26, 2006 Tuesday

Inflation in Armenia may total 5% as against envisaged 3%, Vahram
Nersisyan, Advisor of Armenia President, told journalists, Tuesday.

He explained the excess of the envisaged indicator by the high growth
of economy and transfers. He said that 3% inflation was forecasted in
case of a 7% economic growth, while the latter is much higher already
now. (11,6% economic growth was fixed in Jan-Jul 2006). Majority of
transfers are from Russia (70%) and the USA (20%). (Private transfers
to Armenia are expected at $1.5 bln in the current year -ed.) At
the same time, Vahram Nersisyan said no one could forecast that
apartments in Armenia would be so highly in demand among Armenians
from Diaspora. It has led to rather a high growth of construction,
which has a tangible share in GDP, he said. He believes that the
5% inflation in 2006 forecasted by IMF is not a bad indicator
for Armenia’s economy. In addition, the authorities hoped that in
conditions of dram appreciation, importers could create additional
demand in the domestic commodity market, which could led to reduction
of consumer prices. "However, it did not happen as the country’s
economy is monopolized. Several big investors are able to control
over the market prices, which is a great problem," he said.

V. Nersisyan added that the high growth of economy and transfers
have led to appreciation of the Armenian dram. Many exporters are
dissatisfied with this circumstance. However, they must rise the
productivity and become more competitive in the world market in
conditions of globalization, he said. Nevertheless, to soften the
consequences of the surplus appreciation of dram that may lead to
economic shocks, the Central Bank and the Ministry of Finance and
Economy of Armenia have issued $100 mln state bonds in the current
year. It was estimated that interest rates of credits could rise in
case of issue of more state bonds.