According to government statistics released the same day, the consumer price index in the first quarter of this year was up by 8.4 percent from the same period in 2009, nearly twice exceeding a full-year maximum inflation target set by the authorities. It was primarily pushed up by double-digit increases in the prices of various services, fuel and other consumer goods.
The rising inflation forced the Armenian Central Bank to tighten its monetary policy and raise its re-financing rate by a total of 150 basis in less than two months. The benchmark rate was set at 6.5 percent on March 9.
“We have entered a period of high inflation which results, among other things, from our expansionist fiscal and monetary policy,” Sarkisian said, opening a weekly meeting of his cabinet. “And that is natural because on the one hand, the expansionist policy spurs economic growth but on the other, brings inflationary pressures. The challenge for the government and the Central Bank is to take measures to restrain the inflationary pressures.”
“By the end of the year we will manage to slightly restrain inflationary pressures and these indicators will decrease,” he said. The rise in inflation already slowed in March, he added.
A senior official from the International Monetary Fund IMF official said earlier this week that the Armenian authorities will pursue “a more neutral” monetary policy “in order to head off potential inflation pressures.” Sarkisian confirmed this.
Andranik Tevanian, head of the private think-tank Politekonomia, insisted that the government and the Central Bank have done little to stimulate economic activity during the recession. He argued that commercial bank lending rates did not fall significantly despite a series of cuts in the minimum cost of borrowing approved by the Central Bank in 2009. Tevanian also said the authorities toughened tax administration, further cutting the already shrinking revenues of Armenian firms and especially small businesses.
Still, Sarkisian again defended his government’s handling of the economic crisis criticized by the Armenian opposition and even some government factions. “We must state that the anti-crisis measures that we took in 2009 are already clearly showing their positive impact on our economy,” he said, pointing to renewed economic growth in the country.
Government data show the Armenian economy expanding by 3.1 percent in January-February 2010 after a steep fall registered last year. Finance Minister Tigran Davtian told RFE/RL’s Armenian service on Wednesday that the growth may well continue unabated in the coming months.
Sarkisian made a similar forecast. “On the quarterly basis, we will again have high indicators of economic growth because we have surpassed quarterly targets for both taxes and social security contributions,” he told ministers.