UNGROUNDED INFLATION?: MANY EXPERTS SAY RECENT PRICE INCREASES BAFFLE LOGIC
ECONOMY | 11.09.13 | 10:41
Photolure
Armen Poghosyan, Babken Pipoyan
By Gohar Abrahamyan
ArmeniaNow reporter
Armenia has posted the highest inflation rates in years during the
past 12 months and this inflation that is well above its projected
level is seen by many experts as abnormal.
According to the Armenian National Statistical Service (NSS), in August
the 12-month inflation rate reached 9.3 percent, which is well beyond
the 4 (±1.5)-percent band projected by the Central Bank.
According to the NSS, food price increases have been 10 percent, prices
for alcohol and tobacco have increased by 5.9 percent, inflation on
non-food products has been 4.3 percent, while services have been
11.2 percent more costly. As compared to July prices increased by
0.3 percent, with food products prices falling by 1 percent, due to
lower prices for agricultural produce, sugar, oil and flour.
Still in August, the Board of the Central Bank decided to raise the
refinancing rate by 0.5 percentage points, setting it at 8.5 percent,
in an attempt to check inflation.
“The decision of the Central Bank is aimed at checking inflationary
expectations formed as a result of domestic developments and softening
the secondary effects of energy price growth. As a result of the
Central Bank’s policy we expect that inflation in the coming months
will fall gradually,” the Central Bank said in its statement.
Mikael Melkumyan, an MP with the Prosperous Armenia Party’s faction,
said on Tuesday that since 2010 the inflation has totaled to 20-30
percent, which, in his opinion, means that the poverty rate in Armenia
is higher than the officially stated 35.6 percent. The lawmaker also
says that in the second quarter of 2013 the GDP growth made only
0.6 percent.
“There is no GDP growth at all, which does not fit in the context
of the program declared by the government. It is impossible that
at the end of December we have a growth of 5-7 percent,” said
the MP affiliated with the party that has positioned itself as an
‘alternative’ to the current government.
Consumers Union Chairman Armen Poghosyan thinks that in reality the
inflation rate is much higher than officially presented by the NSS,
as the statistical body surveys 700 names of products, producing a
much lower general inflation index than, for example, a list of 20
essential goods, which account for the bulk of family budget expenses
in Armenia, would do.
“There is nominal inflation, when you see that prices for a certain
product have gone up, and there is criminal inflation, when the price
is the same but the product weighs less or the content of sugar in a
product has been reduced. An ordinary consumer will hardly notice that,
as there are competent bodies for that with all possibilities to check
it,” said Poghosyan, talking to ArmeniaNow. He added that recently
he has also received reports about increased prices of baby food.
Aware and Protected Consumer NGO founder and chairman Babken Pipoyan
told ArmeniaNow that due to the recently introduced excise tax on
beverages prices for these products have also gone up. Prices of
dairy products, bread, eggs have also increased, he said.
“The problem is that in Armenia, unlike other countries, price
increases baffle all logic, which is due to improper control by
competent bodies,” said Pipoyan, adding that no foundation has been
presented for price increases in the dairy products and eggs market,
for instance.
While many connect the recent price increases to the rise in the
tariffs for natural gas and electricity, Pipoyan says that the current
inflation is disproportionate to higher energy prices and in many cases
prices for some goods are raised 10 times as high as they should have
been if only higher energy costs were taken into account.