ARMENIAN INFLATION ACCELERATES FURTHER IN FEBRUARY
by Venla Sipila

Global Insight
March 4, 2008

Inflation pressure remains high in Armenia in early 2008. According
to latest data from the Armenian National Statistical Service,
consumer prices in the country increased by 7.5% year-on-year (y/y)
in February, ARKA News reports. Thus, inflation accelerated further
from the already elevated rate of 6.6% y/y registered in both January
and December. Food prices surged by 10.8% y/y, while prices of non-food
goods increased by a more modest rate of 4.8% y/y and service charges
gained 4.7% y/y. Measured month-on-month (m/m), consumer prices on
the whole rose by 1.1% after gaining 2.4% m/m in January.

Specifically, cost of good increased by 0.6% m/m while non-food
good prices rose by 0.5% and service prices rose by 2.3% m/m. The
rapid pace of service price growth was mainly attributed to growth
of 6.8% m/m in the cost of medical services and an increase of 4.1%
m/m in the prices of cultural services. The cumulative consumer price
growth for January-February registered 3.4% while prices rose by 7%
y/y over the first two months of this year.

Significance:While food prices typically tend to rise in the winter
months, this year’s increases are also notably pushing up the annual
inflation rates, as world market prices for grains remain high. High
energy prices are also contributing to inflation. However, as Armenian
growth is finally expected to cool somewhat after a prolonged very
strong period, price pressure from the demand side should somewhat
ease this year, although still remaining a clear factor in boosting
inflation. In any case, inflation pressure in Armenia is likely to
remain considerable in the near term making achieving the target
specified by the Central Bank of Armenia (CBA) at 4% a challenging
task.