IMF FORECASTS INFLATION IN ARMENIA TO EXCEED THE LEVEL TARGETED IN ARMENIA’S BUDGET IN 2008

arminfo
2008-04-03 17:46:00

ArmInfo. By the end of 2008, inflation in Armenia will exceed the
4%(+/-1,5%) level targeted by the Central Bank of Armenia (CBA),
International Monetary Fund’s Resident Representative in Armenia
Ms. Nienke Oomes said in an interview with ArmInfo’s correspondent.

She said that the reason for exceeding of the inflation targeted
in Armenia is mainly connected with the growth in international
food prices. "We are sure today that inflation will be higher than
targeted at the end of 2008 but it is still hard to say how much
higher it will be", she said. The IMF representative added that in
March 2008 inflation made up 9.6% as compared with March 2007, 7.5%
in February 2008 as compared with February 2007, and 6.6% in January
2008 as compared with January 2007.

Nienke Oomes noted that food expenditures in Armenia total 53,9%, of
which 14,9% – on bread and cereal products, and this characterizes
the high poverty level in the country. Nevertheless, according
to the results of 2007 the lowest inflation among CIS countries
was registered in Armenia, while, at the same time, comparatively
high import prices are observed in Armenia, she said. She partially
explained this situation by high monopolization at in the domestic
market, which constrains development of competitiveness in the country.

She added that the IMF does not recommend the CBA to change its
inflation target, because it is not in the CBA’s power to restrain
the growth of prices in the republic resulting from external
factors. However, if the increase in food prices in Armenia causes
increases in other prices, for instance, in the sphere of public
catering. Armenia’s authorities will have to decrease the influence
of this secondary effect, Oomes said.

First and foremost, inflation will affect the living standards of the
poor segments of the population, and as 26.5% are below the poverty
line in Armenia, the high growth in prices may cause social tension
in the country.

Furthermore, production costs may increase, and this will have a
negative effect on the state of the whole economy of Armenia. If
inflation begins to exceeds 10%, this may even slow down the GDP
growth rates, the IMF representative said.

From: Emil Lazarian | Ararat NewsPress