Its governor Martin Galstian says Armenia’s Gross Domestic Product (GDP) will expand by 1.4 percent instead of 2 percent that was forecast before the start of the year.
“It is mainly due to the slowdown recorded in certain sectors of the economy during the fourth quarter [of 2020] and in the first quarter of this year, in particular, in industry, services, agriculture,” Galstian said at a news conference on Tuesday.
The Armenian economy contracted by 8.5 percent in 2020 against the background of the autumn Armenian-Azerbaijani war in Nagorno-Karabakh and a continuing COVID-19 pandemic.
Galstian said that the current inflation, including increases of prices for basic foodstuffs, is mainly influenced by the international market situation as well as the devaluation of Armenia’s national currency, the dram, which has lost nearly 10 percent of its value since last year’s war.
“Under the influence of positive expectations for the recovery of global demand, as well as due to a number of supply factors, international food markets have shown some price increase tendencies, which also contributes to the formation of a higher-than-expected inflationary environment in partner countries. In such a situation, the Board of the Central Bank still expects some inflationary impact from the external sector on the Armenian economy,” the Central Bank’s governor said.
Armenia’s Central Bank left the current refinancing rate unchanged. It was raised by 1 percentage point in December and then was increased by 0.25 percentage point in February to stands at 5.5 percent. This monetary instrument is used to check inflation.
As of February, the 12-month inflation in Armenia amounted to 5.3 percent. Galstaian said this index is expected to decrease in the near future to stabilize around the projected 4-percent inflation rate.