YEREVAN, December 16. /ARKA/. At a press conference on Tuesday, the Chairman of the Central Bank of Armenia Martin Galstyan called the 1% increase in the refinancing rate a rather drastic step.
In his words, in the fourth quarter, the actual development of the global economy was mainly influenced by the new wave of coronavirus and related restrictions in some countries, which negatively affected global demand and economic activity.
He said that on the other hand, in 2021, expectations regarding the possible effective use of vaccines from the beginning of the year created a favorable environment in terms of the prospects for a recovery in global demand.
“In this situation, inflationary trends are recorded both in the international markets for raw materials and in the context of food products, which is gradually reflected in the inflationary environment of partner countries. Based on the above-mentioned events, the central bank board believes that a certain inflationary impact from the external sector on the Armenian economy is expected,” Galstyan said.
At the same time, he noted that in the third quarter, according to the forecasts of the central bank, a 9.1% economic decline was registered in Armenia compared to the same period last year, which was associated with all the reductions recorded in the economy, especially in the service sector.
In the fourth quarter, he said, according to the central bank, low economic activity and weak domestic demand will persist due to the negative consequences of the introduction of martial law in Armenia, the outbreak of a new wave of coronavirus and its rapid spread, as well as the negative impact of uncertainties in economic growth prospects under these factors.
“On the other hand, the implementation of an expansive fiscal policy will continue to have a positive impact on aggregate demand. In such conditions, the annual estimates of economic growth for 2020 have not been revised, ”Galstyan said.
He said that, taking into account a certain acceleration of inflation with the expected inflationary effects from the external economy and the growth of the country’s risk premium, the central bank board considers it expedient to raise the refinancing rate.
The board also believes, he said, that the monetary policy continues to be stimulating, which will need to be gradually reduced in the forecast horizon, ensuring inflation stabilization around the target of 4%.
“We took a rather drastic step – raising the refinancing rate by 1%. However, the Board of the Central Bank believes that with high uncertainty in economic prospects, there are risks of deviation from the forecast in the short term. Therefore, the Central Bank constantly monitors the development of events and is ready to react accordingly, ensuring price stability in the medium term,” Galstyan said.
At the meeting on December 15, the Board of the Central Bank of Armenia made a decision to increase the refinancing rate by 1.0 percentage points, setting it at 5.25%. The rate of the Lombard repo provided by the Central Bank was 6.75%, and the rate on funds attracted by the central bank from other banks was 3.75%.
For the last time, on October 27, the Central Bank of Armenia left the refinancing rate unchanged, keeping it at 4.25%. -0-
