ARMENIAN CB FORECASTS 6.2% ANNUAL INFLATION IN 4TH QUARTER 2008

ARKA
July 14
YEREVAN

The Central Bank of Armenia (CBA) forecasts 6.2% annual inflation
in the 4th quarter of 2008, and 5.1% inflation in the 2nd quarter of
2009. The protocol on the forecasts and monetary policy of the Central
Bank of Armenia (CBA) for the 3rd quarter of 2008 says that the new
forecast has been scaled down as compared with the previous ones, the
actual inflation rates recorded in the 1st half of 20098 considered.

Specifically, the CBA forecasts a 20% fall in the domestic prices for
baked goods in the 3rd quarter of 2009. As regards the 1st and 2nd
quarters of 2009, the aggregate index of consumer prices considers
both direct (0.8%) and indirect (0.5%) shares in the rise for gas
price, a 0.6% share in the possible rise for electricity prices,
as well as indirect influence (a 0.3%-0.4% share) on the rise in
oil prices. Also, the CBA considers secondary influence by a rise in
prices for food products, which prices are gradually falling now.

The CBA does not rule out some uptrend in inflation rates. Specially,
with the world prices for cereals falling, a more serious fall
in the prices may be expected in Armenia due to a faulty domestic
market. Besides, higher-than-forecast world prices for cereals may be
formed. Also, a greater than forecast deficit of the current account
of the balance of payments may cause a higher rise in prices for
imported goods thereby causing a rise in inflation rates.

Among the factors that may curb inflation is a possible high increase
in the agricultural sector due to favorable weather conditions.

A deflation rate of 0.5% was recorded in Armenia in June as compared
with May 2008, which is in conformity with the CBA’s forecast made
in March.

The annual inflation recorded in June was exceeded the target by 4%.