War Has Not Yet Impacted the Economy Significantly, Says Former Central Bank Head

In recent days, a stabilization has been observed in the exchange rate market in Armenia. This observation was made by economist and former Central Bank president Bagrat Asatryan in an interview with Lragir.am.

Recently, the appreciation of the dollar and the depreciation of the dram have been noted in Armenia. “I want to remind that we are talking about a depreciation of only 5-6 percent of the dram since the beginning of the year, which is not a significant shock for the currency market,” said Asatryan.

“The whole issue is that the expectations formed in our society are, of course, negative. This is understandable; it is also clear that it had a certain impact on the currency market. However, it should be noted that in terms of exchange rate fluctuations, the fundamental factors are essential—the macroeconomic situation and the main characteristics of fiscal policy. In this respect, the year is bad; it is obvious, and although this bad situation has been deepening throughout the year, there are no drastic changes,” he stated.

According to him, it is already visible that this year will end with a 7-8 percent economic decline. “But it should be said that the war has not yet had a significant impact on the economy; its consequences will manifest more in the upcoming years—2021-2022,” Asatryan added.

The Central Bank recently announced that it will conduct operations in the foreign exchange market. According to Asatryan, this had an impact on the market. “The Central Bank clearly showed its position and directly informed market participants that it knows its actions and how it will behave. This alone had an effect,” he said.

Asatryan noted that it should not be forgotten that over the past 10 months, inflation in Armenia has been recorded at just about 1 percent, and this fluctuation in rates cannot significantly affect the consumer market. Another issue concerns trade relations within the EAEU. According to him, today the Armenian dram is the most stable among the EAEU countries, which is not very beneficial for local producers in terms of external competitive conditions.

“But the depreciation of about 5 percent, I repeat, is not terrible. Fluctuations in our exchange rate market have always existed and will continue to exist, as a floating exchange rate policy has been adopted. When the internal political situation and economic conditions are unstable, naturally, negative expectations will also exist among the public. My advice to our citizens is not to worry too much. It is better to follow the price levels and the events occurring in the consumer market. Here, it is clear that there are no significant negative developments,” emphasized Asatryan.

According to him, there are currently no substantial grounds for social tension. “You should monitor the prices. The exchange rate is for financial market participants. For citizens who receive salaries and pensions, there are no significant negative developments. Our social situation is somewhat dependent on the remittances coming from abroad, and there are even some positive changes, as, for the amount of money transferred, our citizens will receive more drams locally. This means there is no social issue at this moment. Social problems can only arise if there is inflation,” Asatryan noted.