YEREVAN, NOVEMBER 11, ARMENPRESS. The decline in foreign currency exchange rate, the dollar, has somehow restrained inflation in Armenia, but the current inflation in global market leaves a great effect on the price increase in Armenia.

According to both public sector representative and expert, this is one of the reasons why importers are not lowering the prices of imported goods even during the appreciation of the Armenian dram. Moreover, there are still uncertainties among importers.

Minister of Economy Vahan Kerobyan and expert at Amberd Research Center Edgar Aghabekyan spoke to ARMENPRESS about the topic.

The Central Bank of Armenia is forecasting 10% economic growth for 2022. According to the data of the Statistical Committee, the 12-month inflation in Armenia’s consumer market (October 2022 against October 2021) comprised 9.5%, and 0.3% compared to the previous month. In January-October compared to January-October 2021, the consumer price index increased by 8.7%.

Asked why importers are not yet lowering the prices of goods as the dram has appreciated, the Minister of Economy said: “I want to note that the lower inflation in the region is in Armenia. The 12-month inflation is around 9.5%, which is significantly lower than that in our neighboring countries. I cannot claim that the 20% appreciation of the dram against the dollar must have had only this effect”.

The minister said the issue is within the Central Bank and the State Competition Commission, they should work together to create correct pricing.

“It’s a free market. And in a free market it is very important that our colleagues of the State Competition Commission and the Central Bank follow the pricing. And accordingly we will already understand where there is non-market pricing, maybe in some cases there are market agreements”, he said.

However, the minister also emphasized the fact that the prices are rising very fast, but fall very slowly. “In other words, the companies, people are very reluctant to lower the prices of their goods. And that is possible only in case of a strong competition and visible horizon. External inflation has a big effect on our domestic inflation. And all these leads to the situation that today we have a very high inflation”, Vahan Kerobyan said.

He didn’t rule out that importers can lower the prices of imported goods if the dram appreciation lasts long.

Expert Aghabekyan sees double reasons for not lowering the prices of imported goods. He says it’s necessary to understand that the change in dollar exchange rate also contains uncertainties. “In other words, importers, who carry out some foreign currency functions, are operating in conditions of uncertainty in the foreign currency market. And we can’t see its effect drastically, they don’t want to take these risks on them. On the other hand, the prices in global market are not falling, the inflation rates continue connected with the situation in Ukraine, logistic problems, etc. And to see fall in prices of goods immediately in parallel with the decline in foreign currency exchange rate is not so expected”, he stated.

The expert noted that the decline in foreign exchange rate has already led to some control of inflation. The Central Bank has also announced that the inflation would be higher if the dram was not appreciated.

“Food, some services, etc: inflation is mainly observed here. In conditions of big domestic demand I don’t think that importers will lower the prices easily. I don’t rule out that there are types of goods in case of which prices could be lowered, and the respective authorities should have dealt with it”, he said.

Asked whether it’s possible for importers to lower the prices in the long-term perspective, the expert said it’s important to consider at what rates the big demand in Armenia is growing, and how long the price increase of some goods will last in foreign markets. “There are some recession expectations in some developed countries next year, and it is expected that the inflation will be somehow mitigated based on that. But the issue is not unilateral, blaming only the importer and putting the problem on himself only is not correct, we need to take into account that there are uncertainties for them. If this equilibrium of formation of the new exchange rate lasts long, I think the importers will lower the prices, on the one hand, and the exporters will be calmer, on the other hand”, he added.

Anna Grigoryan