Significant Increase in Inflation Expectations in Armenia: Central Bank

A significant increase in inflation expectations continues in Armenia. This information is reported by the Central Bank of the Republic of Armenia in its "Inflation Report (Monetary Policy Program for Q1 2021 - Report on the Implementation of the Monetary Policy Program for Q4 2020)."

The report specifically mentions: "Due to the ongoing spread of the coronavirus pandemic globally, the state of emergency declared in Armenia since the end of last year, and the resulting high uncertainty regarding the economic outlook, low economic activity and significant inflation expectations continue to prevail in Armenia."

According to the Central Bank's assessment, inflation trends have primarily been driven by supply factors, including inflationary effects transmitted from international commodity markets and the depreciation of the national currency. According to the Central Bank's baseline scenario, the annual inflation rate will remain at a high level in the upcoming quarters. "This will primarily be influenced by short-term supply factors, whose effect will gradually neutralize, reflecting a downward correction in medium-term inflation," the Central Bank’s report states.

The report notes that considering the short-term nature of inflationary factors, the Central Bank's monetary policy in the near future will aim to neutralize any risks of accelerating inflation expectations without harming the recovery of domestic demand.

In the context of the pandemic and economic uncertainties, the Central Bank has slightly revised downward its annual economic growth forecast. "In the medium term, economic growth will recover to some extent, but will only approach the estimated long-term stable level towards the end of the horizon, due to expected low growth trends in productivity and investments," the Central Bank’s report highlights.