YEREVAN, June 16. /ARKA/. Armenia’s Central Bank has cut today the refinancing rate by 0.5 percentage points, setting it at 4.5%. It said the 12-month inflation in May 2020 rose to 1.2%.
According to the regulator, because of the coronavirus pandemic, the world economy is expected to record one of the biggest recessions in the second quarter of the year and to start recovering at a slower than expected pace, while the uncertainty associated with the further course of the pandemic remains.
The Central Bank said also commodity prices have shown stability with some signs of recovery due to cautious optimistic expectations from the Chinese economy. The external sector is expected to continue to exert a deflationary effect on the Armenian economy, according to it.
According to the Central Bank, the economic decline in Armenia will deepen in the second quarter due to demand and supply factor in such sectors as construction and services, driven by cuts in private spending.
According to the regulator, despite the stimulating effect of fiscal policy over the last year, the effects of declining private demand will prevail, largely due to the persistence of uncertainties associated with the pandemic.
“Given the slowdown in the recovery of external and domestic demand, a low inflation environment and the negative impact of the resulting high uncertainty, the Central Bank Board considers it advisable to lower the refinancing rate as a broader step. It believes that in this situation it will be necessary to maintain a stimulating position also in the medium term to preserve low inflation in the short term,” it said.
On April 29, the parliament of Armenia approved a revision of budget indicators to offset the consequences of the COVID-19. The originally projected GDP growth of 4.9% was reduced to 2% Also, the original GDP volume of 7.095 trillion drams was reduced to 6.485 trillion drams and the earlier projected deficit budget of 160.7 billion drams was raised to 324 billion drams.
The share of tax revenues in GDP will drop from the earlier projected 22.6% to 22.1%. More precisely, tax revenues will drop by 169.1 billion drams to 1 trillion 433 billion drams. The state budget deficit will grow to 5% of GDP from the previous 2.3% and the government will need to secure additional funding of 260 billion drams. -0-
