YEREVAN, August 26. /ARKA/. International credit rating agency S&P Global Ratings has forecasted an average inflation rate of 1.6% for the year, reflecting a broader increase in price pressures.
Given this inflation forecast and the Central Bank of Armenia’s target of 4%, S&P expects that the institution may continue to gradually lower its key policy rate, the agency stated in its report.
On July 30, the Central Bank of Armenia’s Board reduced the refinancing rate by 0.25 percentage points to 7.75%. This marks the 10th consecutive reduction in the refinancing rate since June last year and the fifth since the beginning of the current year.
S&P analysts note that after peaking at 10.3% in June 2022, overall inflation has significantly decreased due to falling food and commodity prices, currency appreciation, and tighter monetary policy.
After several months of negative inflation figures, it increased, reaching 0.8% in June compared to the same period last year. This rise is driven by base effects along with higher transportation and service costs, the report said.
The 2024 state budget sets inflation at 4% (±1.5%). According to the Central Bank’s monetary policy report for the second quarter of this year, inflation in Armenia is expected to be within the range of 0.9-1.3% by the end of 2024, with a forecast of 3.8-3.2% for 2025 and 3.7-4% for 2026.
The World Bank expects inflation in Armenia to be 3% in 2024, 3.5% in 2025, and 4% in 2026. The IMF predicts that prices in Armenia will rise by 3.1% in 2024 and by 3.7% in 2025. According to the Asian Development Bank, inflation in Armenia will be 3% in 2024 and will accelerate to 3.5% in 2025 amid a loosening of monetary policy. The Eurasian Development Bank expects inflation in Armenia to be around 1.5% by the end of this year.
