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Global Insight
January 30, 2013
Armenian inflation ends 2012 on target
by Venla Sipila
According to the latest inflation data from the Central Bank of
Armenia (CBA), consumer prices ended 2012 by gaining 3.2% year-on-year
(y/y), following growth of 3.6% y/y in November 2012 and 3.4% y/y in
October. With more modest inflation rates in the preceding months, the
average annual rate for last year as a whole came in at 2.6%,
inflation thus markedly moderating from the 2011 average of 7.7%.
Among the key good groups, prices of non-food items increased by the
fastest rate in December, surging by 5.7% y/y, while food prices
climbed by 3.0% y/y, and the cost of paid services rose by a
relatively modest rate of 2.1% y/y. For the year as a whole, non-food
prices increased by most; the average gain of 4.6% clearly exceeded
food and service inflation rates, at 2.0% and 2.1%, respectively.
Significance:Armenian inflation in late 2012 was slightly more modest
than we expected. The significant easing of inflation pressures last
year in comparison to 2011 was somewhat surprising, taking into
account the strength of global food prices, in particular, combined
with notable role of food items in the average Armenian consumption
basket. However, this was partly explained by the good domestic
agricultural harvest. The end-2012 inflation comfortably fits the
target set at 4% +/- 1.5 percentage points by the Central Bank of
Armenia (CBA). We expect Armenian inflation to remain within target
range in 2013, staying fairly stable in the coming quarters. Thus, we
also believe that there will be little reason for the CBA to revise
its policy interest rate soon. The refinancing rate ended 2012 at 8%,
having remained unchanged throughout the year. Risks to the inflation
outlook are posed by developments in global commodity prices, as well
as the risk that muted global growth will markedly harm remittance
inflows, leading to deprecation of the dram, and further to higher
inflation via increased import prices.
January 30, 2013
Armenian inflation ends 2012 on target
by Venla Sipila
According to the latest inflation data from the Central Bank of
Armenia (CBA), consumer prices ended 2012 by gaining 3.2% year-on-year
(y/y), following growth of 3.6% y/y in November 2012 and 3.4% y/y in
October. With more modest inflation rates in the preceding months, the
average annual rate for last year as a whole came in at 2.6%,
inflation thus markedly moderating from the 2011 average of 7.7%.
Among the key good groups, prices of non-food items increased by the
fastest rate in December, surging by 5.7% y/y, while food prices
climbed by 3.0% y/y, and the cost of paid services rose by a
relatively modest rate of 2.1% y/y. For the year as a whole, non-food
prices increased by most; the average gain of 4.6% clearly exceeded
food and service inflation rates, at 2.0% and 2.1%, respectively.
Significance:Armenian inflation in late 2012 was slightly more modest
than we expected. The significant easing of inflation pressures last
year in comparison to 2011 was somewhat surprising, taking into
account the strength of global food prices, in particular, combined
with notable role of food items in the average Armenian consumption
basket. However, this was partly explained by the good domestic
agricultural harvest. The end-2012 inflation comfortably fits the
target set at 4% +/- 1.5 percentage points by the Central Bank of
Armenia (CBA). We expect Armenian inflation to remain within target
range in 2013, staying fairly stable in the coming quarters. Thus, we
also believe that there will be little reason for the CBA to revise
its policy interest rate soon. The refinancing rate ended 2012 at 8%,
having remained unchanged throughout the year. Risks to the inflation
outlook are posed by developments in global commodity prices, as well
as the risk that muted global growth will markedly harm remittance
inflows, leading to deprecation of the dram, and further to higher
inflation via increased import prices.