Does Armenian government combat inflation of stimulate it?

Unfavorable agricultural year and international market problems are named among the reasons of inflation.

According to preliminary statistical data, Armenia’s GDP was 3.1% higher in January-August 2010 as compared with the same period in 2009. The RA National Statistical Service reported that GDP amounted to AMD 2,042,788,800,000. Besides, consumer prices were 7.7% higher in January-August 2010 as compared with the same period last year. The monthly inflation rate reached 1.3%.

PanARMENIAN.Net - These macroeconomic indices would not be alarming bit for a 8.8% economic growth registered in the first 5 months of 2010 and the sharp slump that followed.

Unfavorable agricultural year and international market problems are named among the reasons of inflation.

Chairman of the RA NA Standing Committee on Financial, Credit and Budgetary Affairs Gagik Minasyan said that significant steps were taken this year to reduce inflation and they will be continued next year. Commenting on 7.7% inflation rate in January-August 2010, Minasyan told a press conference that the inflation growth is reasoned by an unfavorable agricultural year and problems in external markets, including the grain market. At the same time, he positively estimated the GDP indices over the first eight months and labeled industry as the driving force of economic growth.

Chairman of the RA NA Standing Committee on Economic Affairs Vardan Ayvazyan said for his part that the export growth, which twice exceeded the import growth, is the most positive index in Armenia's economy in 2010. He noted that he thoroughly studied 100 Steps program of the Armenian National congress on overcoming the crisis, saying that many provisions of the program coincide with those in the governmental program.

Armenia's foreign trade turnover amounted to $2.959bln in January-August 2010 that is 25.3% higher as compared with the same period in 2009. Besides, 6% growth was recorded in the trade turnover in August compared to July. Export amounted to $598.1mln during the reporting period that is 43.8% higher as compared with January-August 2009, while 21.3% growth was recorded in import, totaling $2,360,600,000.

In the wake of the global recession, the average level of economic freedom around the world dropped for the first time in decades, the Fraser Institute, Canada's leading public policy think-tank said in the Economic Freedom of the World: 2010 Annual Report, where Armenia is 50th; Georgia is 23rd, jumping up 20 places since last year. Turkey and Azerbaijan rank 74th and 93rd respectively. According to the study, Armenia pursues a correct money-and-credit policy, the problem in the country remaining a biased court system and extra business expenditures, mostly bribes.

With discrepant indices, it's hard to forecast the state of Armenian economy by the end of the year. The government's efforts to reduce inflation seem very doubtful, specifically in the light of the recent decision to impose “fair” taxes on fuel companies and cigarette production. Prime Minister Tigran Sargsyan supposes that cigarettes in Armenia are too cheap. Time will show whether this move can prove an efficient tool to combat smoking or it will just hit the pockets of the smoking part of population.

Hripsime Hayrapetyan
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