Aghanbekyan: Armenia Steps Into Stagflation Phase

AGHANBEKYAN: ARMENIA STEPS INTO STAGFLATION PHASE

ARKA
Feb 17, 2009

YEREVAN, February 17. /ARKA/. Stagflation process is starting in both
Armenia and Russia, academician of the Russian Academy of Sciences
Abel Aghanbekyan said.

This process implies reduction and stagnation of the production along
with growing unemployment and high inflation, the academician said.

"The worst thing for Armenia and Russia in the crisis period is
that both countries came to it with a high inflation," he said at an
anti-crisis management round-table discussion on Monday.

According to Aghanbekyan, it is hard to find a way out from
stagflation and the first thing to be done under these conditions
is to suppress the inflation. There are prerequisites for it both in
Armenia and in Russia, as wholesale prices are going down, inflation
can be precipitously reduced if monopoly trends are scotched, the
academician said.

According to the academician, for this development "the government
should put the lid on its own desires, which has not been done by
the Russian executive authorities, and that was a blunder".

Having raised the prices by 25% the Russian government gave a
no-price-reduction signal to monopolies: despite the three-time fall
in oil prices, the reduction was only 15% in Russia, Aghanbekyan
said. Currently the prosecutor’s office is conducting an investigation
to establish the companies that use overpricing and shift the crisis=2
0 hardships onto consumers, he said.

The academician expressed hope that this will not be the case with
Armenia.

Yet, all the governments are the same – they want high taxes and
resort even to such unpopular measures under crisis as boosting of
state prices is, Aghanbekyan said.

A 9% rise was recorded in consumer prices in Armenia in
January-December 2008 against January-December 2007.

GDP is planned to total 4trln 169bln Drams in Armenia in 2009 with
real GDP growth at 9.2%, deflator at 4% and inflation at 4±1.5%.

4% inflation was recorded in the country in January this year
against January last year. Prices went up by 1.2% in January against
December 2008 mainly due to seasonal fluctuations in prices for main
foodstuffs.