At a press conference on September 16, Galstyan described the possibility of a gas price increase in Armenia as a Type X scenario, which “implies something more apocalyptic,” stating that the regulator’s response to it should go beyond the usual regime.
“Scenarios X or apocalyptic scenarios and I’m not talking about the gas price being apocalyptic, but about the characteristics of the scenario itself are those scenarios that are extremely unlikely but could have a major impact. This was precisely the goal to explain to the audience that we are also considering such scenarios,” Galstyan said. He explained, however, that these scenarios are not included in the Central Bank’s scenario-based decision-making approach because the regulator considers them unlikely.
Currently, when forecasting monetary policy and determining the refinancing rate, the Central Bank of Armenia relies on two alternative inflation scenarios A and B that are higher and lower than market participants’ expectations, focusing on risk management, minimizing potential economic losses, and increasing the transparency of decision-making.
Impact on the Economy
Responding to a question about the Central Bank’s position on the EAEU’s forecast of a possible 69% increase in gas prices for Armenia if its membership in the Union is suspended, the head of the Central Bank said that this is a different matter.
“If, for example, the price of gas were to rise by 69% or 79% […], we will pursue a policy aimed at returning inflation to our target. […] We will see what happens and, naturally, take appropriate steps more drastic or more lenient. “This will depend on the development of events and possible scenarios,” Galstyan said.
He announced that the Central Bank will begin another round of discussions on interest rates and monetary policy on November 2, during which, among other things, the potential knock-on effects will be discussed.
“An increase in gas prices could have various consequences. Some households may decide to consume less, while others may increase their gas budgets, leaving them with less money for other savings-related expenses,” he explained.
Speaking about businesses, the head of the Central Bank noted that some enterprises will be very sensitive to gas prices, while others will not feel the change at all.
“That is, it is also necessary to consider the sectoral structure of the economy to understand the impact this will have on the economy,” he said. Galstyan also emphasized that, unlike other agencies that can take certain preventative measures, such as stockpiling gas, the Central Bank will respond to an event that has already occurred, and will determine the intensity with which to apply its instruments, depending on whether the gas price changes or not.
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