PRIME MINISTER OF ARMENIA: SUDDEN DEVALUATION OF THE ARMENIAN DRAM WILL HAVE AN ADVERSE EFFECT ON PEOPLE’S WELL-BEING, BUT POSITIVE EFFECT ON EXPORTERS
by Karina Melikyan
ARMINFO
Thursday, November 27, 12:45
The latest sudden devaluation of the Armenian dram will have an
adverse effect on people’s well-being, but will have a positive
effect on exporters, Prime Minister of Armenia Hovik Abrahamyan told
reporters, on 27 November. He explained that the given situation will
enable exporters maintain the production volumes and sales process,
and create new jobs.
Earlier, on Tuesday, Armenak Darbinyan, a member of the Armenian
Central Bank Council, said in a statement that the national
currency rate correction bears no serious inflation risks. Neither
it threatens to the financial stability. He explained the national
currency rate correction with external factors such as slackening
of the economic growth and devaluation of the national currencies
of the partner-states as well as commodity market trends in a range
of countries. A. Darbinyan said the given step of the Central Bank
enabled settling two problems: maintain the competitive ability of
exports and ensure the transfers to Armenia that usually intensify
in the pre-New Year period.
The average growth of the USD exchange rate in Armenia from 419.5 to
435 AMD/1USD over the past weekend is most likely of adjusting nature.
Independent market analysts have expressed such an opinion on the
condition of anonymity. In early November the Central Bank of Armenia
(CBA) started interfering in the situation more and more actively
and tried to smooth out the possible exchange rate fluctuations in
the market by increasing the currency interventions. The market is
already experiencing a stable upward move connected with certain
growth expectations. Thus, October’s comparative calmness in the
currency market of the country was followed by an active phase on
the very first days of November due to the devaluation expectations
connected with the situation in Russia, one of the most important
trade partners of Armenia.
The sharp RUR devaluation amid the “sanction war” has resulted in
considerable slowdown in the growth rates of private transfers
to Armenia and in certain difficulties for Armenian exporters,
particularly, in reduction of foreign exchange revenues especially in
the processing industry and the mining industry, which has become a
hostage of the tangible decline of world prices in the markets of raw
materials and metals. According to the official statistics, the export
of commodities and services from the country has decelerated the rates
in both monthly and annual dynamics: in October 2014 export dropped
by 1.1% (versus 21.3% growth in October 2012), and in the two-year
dynamics the export growth rates dropped almost twofold – from 18%
to 10.9%. These are the fundamental reasons that dictated the need
for balancing the exchange rate parity by means of AMD devaluation. As
a result, experts think that the CBA’s actual policy of “the managed
float” has provided an opportunity to open the oxygen valve for the
export- oriented enterprises, including those exporting products not
only to Russia.
Independent experts believe that the USD exchange rate is likely to
remain more or less stable in December and possibly January, i.e.
during the Christmas consumer excitement. Within the mid-term outlook –
February-March 2015 – experts forecast possible rise in the exchange
rate. Its growth rates will depend on the global trends directly
affecting the macroeconomic indices and adjusting the monetary policy
of the Central Bank.
From: A. Papazian