In late 2023 to early 2024, deflation formed in Armenia. This is highlighted in the macroeconomic review prepared by the Eurasian Development Bank (EDB) for the week.
The review notes that in January 2024, prices decreased by 0.9% following a 0.6% decrease the previous month, mainly due to the dynamics of food prices (down 5.8% year-on-year in January and 4.8% year-on-year in December).
Key factors contributing to the deflation by late 2023 to early 2024 included declining prices for imported goods and the impact of tight monetary conditions in the first half of 2023.
However, EDB analysts anticipate inflation to accelerate by the end of the first quarter of 2024.
"According to our estimates, under the base scenario, inflation will be near the lower bound of the Central Bank of Armenia's target range (4±1.5%) by the end of the first half of this year," the research states.
Meanwhile, the formation of a deflationary background at the end of the previous year, including significant easing of external price pressures, allowed the Central Bank of Armenia to proceed with monetary policy easing.
"The Central Bank of Armenia, at its meeting on January 30th, lowered the refinancing rate for the sixth consecutive time - by 0.5% to 8.75%," the EDB review states.
"Since the start of the easing cycle in the second half of 2023, the refinancing rate has decreased by a total of 2%. We expect further reduction of the refinancing rate - to 8% annually during the first half of this year," the bank's analysts note.
