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Armenia’s Central Bank cannot provide precise calculations of the impact of a possible increase in natural gas prices on the country’s economy and living standards without complete information, Governor Martin Galstyan said at a press conference on 3 November.
“As regards gas prices, developing a scenario requires specific parameters: the size of the price change, the channels through which it would have an impact, the mechanisms through which policy tools would interact, and so on. We do not have this information, so I think it is premature to construct any scenario on this issue. We have, however, discussed it and carried out some sensitivity analysis to establish what would happen if gas prices rose by, for example, 10 per cent. Our assessment is that this would have both a direct and an indirect impact on our consumer price index. The direct impact would lead to a corresponding increase in the prices of gas-related goods, with a 10 per cent rise in gas prices generating 0.6 per cent inflation in this segment. In related industries that use gas to produce finished products, prices would rise by a further 0.1–0.2 per cent. In other words, according to our expert sensitivity assessments, a 10 per cent increase in gas prices could result in inflation of approximately 0.8 per cent or more. It is important to note that, without information, we cannot determine whether this increase would be linear. Developments will depend on the scenario that materialises,” Galstyan said.
Asked by a journalist how much inflation would result if gas prices rose by 69 per cent, as mentioned in discussions, rather than 10 per cent, Galstyan replied:
“We have not made calculations using that figure. It was not of interest to us because the substantive report underpinning that calculation contained no policy response element. In other words, if prices are going to rise that much, the relevant Armenian authorities would be expected to implement some policy to counteract the increase so that it is not passed on to people or the economy in the same way. We did not see that element, so at this stage we have carried out some sensitivity analysis. Once the situation is clear, we will incorporate it into our models and determine how to respond.”