Tuesday, November 11 2014

The Central Bank of Armenia is attentively watching the situation on the currency market and will interfere in case of sharp fluctuations, Chairman of the Central Bank of Armenia Artur Javadyan said in the Armenian Parliament on Tuesday.

He said that the CB is not going to change its position and will continue its policy of freely floating rate. "In summer we bought foreign exchange on the free market every time AMD got stronger so as to stimulate producers and exporters. Now if AMD depreciates, we are ready to cushion the drop," Javadyan said.
He assured the MPs that RUR's depreciation will have no direct effect on Armenia's economy as exports to Russia make up no more than 20% of all of Armenia's exports, with Russia's share in Armenia's trade being just 25%. 

Javadyan said that Armenia's banking system has enough high-quality instruments for financing exporters and for hedging them against possible risks in Russia. At the same time, he admitted that the situation on Russia's currency market may affect the inflow of private transfers into Armenia. "Even though we have not yet summed up the results of Jan-Sept 2014, we suppose that there will be no 10% growth in this index," Javadyan said.

He said that this year the average annual inflation in Armenia is expected to make up 3.5% against planned 4%. "Next year we expect 4- 4.5% inflation due to a number of macroeconomic, international and regional factors," Javadyan said.

According to the Central Bank of Armenia, following RUR's drop against USD, the inflow of private transfers from Russia into Armenia dropped from forecast 8% to real 0.4% and made up $1.323bln as of Oct 1 2014.  In Jan-Sept 2014 Russia's share in the transfers made up 83.4% against 85.7% in Jan-Sept 2013. The inflow from Russia into Armenia dropped by 2.3%, the outflow from Armenia to Russia grew by 11.4%.

In the last two weeks the USD rate on Armenia's retail currency market rose from 409 AMD per 1 USD on Oct 28 to 416 AMD per 1 USD on Nov 11.  The official rate grew from 410.24 AMD/1 USD to 415.30 AMD/1 USD.  Independent experts and market participants are sensing certain tension on the currency market as they are expecting a growth in the rate due to a drop in exporters' currency earnings and the inflow of private transfers from Russia. Traditionally, before New Year, AMD gets stronger due to growing inflow of private transfers but this year experts expect an opposite tendency but warn that there may be sharp fluctuations by the end of the year.