Eventually we succeeded in coping with inflation. At least the national statistics has published such information. The recent publication of consumer products prices on part of the National Statistics Service (NSS) for January-August 2011 shows that the inflation rate for 12 months as of August was 4.8%.
This means that compared to the same month of previous year the prices of goods have grown by 4.8% only. This means that the government, including the Central Bank, have been able to keep the margin of inflation in the planned limits of 5.5. The most important thing is that they have been able to fulfill the president’s order in March. In March the inflation rate was 11% and during a meeting at the president’s office the head of the state instructed the government to cut down the level of inflation twice till the end of the year. There are three months till the end of the year, but according to the official information, the inflation rate has been cut down even more than the instructed level. This indicator (4.8%) means that even if till the end the inflation level grows by 1%, the government will still be in the permitted limits of inflation.
By the way, the first one to be responsible for the achievement is the statistics service as this institution has made a lot of efforts to cut down the inflation index, i.e. the figures in the reports. For example, during the year this institution changed the methodology of inflation index calculation, as a result of which this index was reduced by approximately 1%. Even the mentioned report shows how hard this institution has worked to report reduced figures.
“In August 2011, compared to July, there has been 0,2% of sugar price inflation, 0,8% of grocery, 0,8% of cigarettes, and 1,3% coffee, tea and cacao prices inflation,” writes the report. One may lose the mind when reading this information because only several days ago the price of sugar was increased by 20-25%. This means that the statistics department has not taken this fact into consideration. In order they do not blame us for misinformation, we think that this was a technical issue and hopefully they will include this information in the reports to be published in September.
Even if the inflation rate does not exceed the planned level during the next months till the end of the year, everyone knows that the first seven months of this year have been quite expensive for the society. It was so expensive that even the statistics services cannot save the situation. However it turns out that there is someone who is better at interpreting statistical information than the services of statistics. This man is Aharon Adibekyan. A couple of days ago he organized a press conference, during which he informed how much it would cost to send a child to school on September 1. The information the sociologist communicated was so surprising that almost all journalists discussed this issue. For example, they tried to find a shirt that would cost 1,000 drams (as the sociologist had said), but they could not find any even in the cheapest markets.
We have compared that information not with the market prices (or survey information) but the official statistics information.
It turns out that even according to the official statistics, which always tends to reduce the costs of parents for school preparation, the expenses are much more than the information provided by Aharon Adibekyan. There is a famous saying, according to which there is a lie, greater lie and statistics. In this situation sociology is above all these three levels. If he has really found a place where there are so cheap goods, he could open a center for shopping support to help the families of schoolchildren.
Let’s return to the president’s instruction. In fact we may assume that the instruction to cut down the level of inflation has been done, and if it is 4.8%, hardly it may exceed 6% till the end of the year. However, during the same meeting the president gave another instruction connected with the exchange rate. He said the following, “Concerning the local currency I should admit that the appreciation of the national currency is not in the interests of the economy and domestic producers, and I think this has been an obstacle for us during a long time. I believe this process will not continue. Of course the exchange rate is established as a result of inflow of foreign currencies, but the statistics shows that the national currency will slowly go down in the price without any rapid fluctuation during the entire year. I think it is normal and in the interests of our companies and exporters.” If it is a wish and forecast, it means it is an order and instruction.
In fact everyone (including the CB) understood that for a country with a huge foreign trade negative balance it is impossible to provide price reduction and currency inflation at one time. If the price of the national currency falls down, it results in increase of imported products. By the way, such announcement has even been made by the Central Bank, saying that we should make a choice between inflation and exchange rate. It is impossible to do both at one time. However, when it was the wish of the head of state, there were no objections and recommendations. What happened later?
We see that in terms of the inflation they did the president’s order. What happened to the exchange rate? After the discussion at the president’s office the national currency started to go down slowly. That process took about 40 days. On March 1 one USD was sold at 368.8 AMD, on April 19-2 it reached 378 AMD. Following that process the price of USD started to go down and reached 370. It lasted very short, approximately ten days. In May the national currency started to go down, and on May 28 the price of one USD was 380.
This process of fluctuation continued and yesterday one dollar was sold at 368.5 AMD. In fact, currently the price of the national currency is higher than on march 11, when the president was forecasting and instructing to provide the vice process.
In a word, the government has been able to fulfill one of the two orders, which is the resistance of inflation. Now we should wait and see what will be the consequences of failing to fulfill the other instruction of the president. Of course the government may try to explain that it was impossible and the inflation rate was more important in terms of protecting the rights of domestic producers. However, during the same discussion the president said that failures and explanation would not be accepted.