Armenian Finance Ministry urging regulator to pursue more flexible and expansionary monetary policy

22.05.2014 20:27
Armenian Finance Ministry urging regulator to pursue more flexible and expansionary monetary policy

YEREVAN, May 22. /ARKA/. On Thursday, Armenian Finance Minister Gagik Khachatryan, presenting the ministry’s report on the central bank’s 2014 monetary policy at a regular Cabinet session, called on the regulator to pursue a more flexible and expansionary monetary policy.

In his words, the central bank says in its monetary policy program’s section on aggregate demand that the negative gap in private expenses will reduce to zero by the end of 2014.

He also said in this connection that economic activity in the country rose 3.3% over the first three months – agriculture contributed 1.5 percentage points to this growth, the services sector added another 1.5 points, trade 0.9 points and construction 0.1 points, while industry had an adverse impact on the growth taking 0.7% of it.

The minister stressed that taking into account this situation as well as negative factors, such as the fallen prices for copper at the world market and economic sanctions against Russia, the finance ministry doesn’t view the regulator’s forecast realistic and finds it too optimistic to expect a 5.8% GDP growth in 2014.

“Things give us grounds for thinking that in 2014 the gap of private spending in GDP will remain negative, and therefore the central bank should display a greater flexibility in spurring the economic activity,” he said.

Khachatryan said that in its monetary policy program the central bank is periodically pointing out the impact of the tax and budgetary policy on the economic growth and inflation. The regulator estimates it at 1.5%, while the finance ministry insists on 0-0.5%.

“Given all these arguments, I find it necessary no longer to consider the tax and budgetary policy as a significant factor impacting the economic growth and inflation and make additional changes in terms of easing the monetary policy conditions,” he said.

It has become known from the central bank’s monetary policy program, he said, that the regulator expects a maximally low inflationary macroeconomic environment in Armenia in 2014, since influence of energy carriers’ prices on inflation will reduced to zero and no inflation pressure will be seen either inside or outside of the country in the second half of this year.

“Summarizing this, I can say that given the current low economic activity and low inflationary environment as well as the central bank’s weakly stimulating or, what is more realistic, neutral tax and budgetary policy, the regulator should pursue an expansionary, not weak policy, which will be in tune with economic developments,” Khachatryan said.

At its today’s session, the Armenian government also approved the finance ministry’s report on the central bank’s 2013 monetary policy. The ministry said in its report that the 12-month inflation stood at 5.6% in 2013, coinciding with the upper benchmark of the projected range, and economic growth was recorded at 3.5%.

In the 2014 government budget, inflation is projected at 4% (±1.5%) and GDP growth at 5.2%. -0---


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