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Fitch forecasts 7.4% for Armenia in 2021

YEREVAN, September 27, /ARKA/. Fitch Ratings has affirmed Armenia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Stable Outlook, saying also that inflation accelerated to 8.8% yoy in August 2021, above the Central Bank of Armenia’s (CBA) target of 4.0%, driven primarily by global pressures on food prices (15.1% yoy), rebounding demand from the 2020 recession, and bottlenecks in supply chains.

Fitch forecasts inflation to average 7.4% in 2021, moderating to average 5.0% and 4.0% in 2022-23 as supply chains and production adjust.

The CBA has raised its policy rate by a cumulative 300bp to 7.25% between December 2020 and September 2021 in response to domestic inflation pressures. An increase in banks’ dram reserve requirements, aimed at enhancing monetary transmission, has also had the effect of tightening monetary conditions.

An unexpected monetary tightening by major central banks to curb rising global inflation could lead to pressure on the CBA to further tighten rates, according to Fitch Ratings. -0-

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