“These are Type X scenarios, which are inherently unlikely but could have significant consequences. That is, we’re not talking about a specific gas price, but about a whole family of similar scenarios, which we call Type X, or apocalyptic, scenarios,” Galstyan said in parliament on Monday during a discussion of Armenia’s draft state budget for 2027.
According to him, starting in 2024, the Central Bank will pursue a monetary policy based on risk management. Unlike the previous approach, which included a baseline and several alternative scenarios, the regulator is now focusing on market expectations and formulating its position based on various development scenarios.
Galstyan recalled that when making its latest decision, the Central Bank raised the interest rate by 0.25 percentage points, as the regulator’s estimates were more stringent than market estimates.
“We believe that external and domestic demand in Armenia has increased. Added to this are supply-side factors, particularly energy and food prices, and other factors. All of this creates an environment associated with inflation risks. Therefore, we have announced the need to raise the interest rate, as this situation is unacceptable for us,” he noted.
What will happen if gas prices rise?
The head of the Central Bank stated that the regulator has estimates for a possible increase in gas prices, but does not have the tools to directly address this factor preemptively until prices actually change.
“Regarding the gas price increase, we certainly have the relevant calculations. However, the Central Bank cannot take any action in the market until the gas price increase has become a reality, as the Central Bank lacks the tools to take preventive action directly on gas prices,” Galstyan explained.
According to him, if gas prices rise, the Central Bank will need to assess not only the change in the border price, but also the consequences for end consumers, possible subsidy mechanisms, and the impact on other sectors of the economy.
“All this will allow us to determine an interest rate level that will prevent inflation from exceeding the established target,” Galstyan emphasized.
Galstyan’s earlier statement about an “apocalyptic” scenario in the event of a sharp increase in Russian gas prices caused a wide response. The reason for this was scenario calculations that projected a possible 69% increase in the gas price for Armenia—from $177.5 to $300 per thousand cubic meters. Prime Minister Nikol Pashinyan stated that even such a price increase would not lead to an “apocalypse” for the country’s economy. However, Armenia has received no official indication of an upcoming increase in the price of Russian gas.
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