Inflationary impact mainly expected from external sector on Armenia’s economy – Central Bank

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 16:41,

YEREVAN, MARCH 15, ARMENPRESS. According to the Central Bank of Armenia, an inflationary impact is mainly expected from the external sector on the economy of the country. At the same time, the Bank says that the deviation risks of inflation from the predicted horizon are mainly balanced.

During today’s session the Board of the Central Bank decided to raise the re-financing rate by 1.25%, setting it at 9.25%. In February 2022, both the 12-month and the normal inflations have declined in accordance with the CBA forecasts, comprising 6.5% and 6.4% respectively.

Due to the current sanctions against Russia, uncertainty with fluctuation of financial markets and economic prospects has significantly increased in the external sector. Slowdown of economic growth rates is expected this year in US and Eurozone, whereas in Russia – an economic decline.

“At the same time, the current disruptions of supply chains in international commodity markets resulted in major increase in prices. This is reflected by creation of a higher inflationary environment compared to what was expected in partner states. As a result, mainly inflationary impact is expected on the Armenian economy from the external sector. The impact of sanctions against Russia will be reflected on Armenia’s economy by significant slowdown of economic growth rates. This will mostly take place at the expense of drop of industry branch”, the Governor of the Central Bank Martin Galstyan said.

Positive developments are expected from the tourism sector. According to the CBA chief, the increase of the region’s geopolitical risks and high uncertainty led to the increase in fluctuation in Armenian financial markets. These uncertainties have also been reflected in the behavior of inflation and inflationary expectations.  

“In such situation the CBA Board finds it appropriate to raise the refinancing rate by a relatively big step. The Board estimates that it will consider the need to tighten the monetary terms in the future in the event of uncertainty with the economic prospect and maintenance of risks of increase in inflationary expectations. As a result of such policy actions, the 12-month inflation will gradually decline and will approach the targeted 4% in the predicted horizon”, the Governor said.

He assured that in case of any risks, the Board will adequately respond and ensure the goal of price stability.