Yesterday the CB publicized the monetary policy of the first quarter of 2010, according to which this year the economic growth will make 0.5-2%.
In its monetary policy program for 2010, the central bank said that its 2009 monetary policy has been focused on combination of spurring economy and ensuring price stability. As main sectors providing growth the program mentions the agriculture (expected 2-4% growth) and services (1-3%). In the industry sector they are anticipating 0-2% growth and in construction – 2-5%. “In the event of stability of interest rates in the end of the second quarter of 2010 the central cost of inflation will amount to 7.9% and in the end of the year – 7.4%. In the predicted period the risk of change will basically lean on progress rather than regress based on the overcoming of the turbulence of the global crisis and increase of the demand of the mining goods and resources,” this is the prediction of the CB regarding the inflation. And as the pressure of inflation is increasing the CB has decided to transition form the expansive monetary policy to the mode of strict monetary policy. “In order to reduce the abovementioned predictions of inflation the conduct of rigid monetary policy in 2010 is justified, which will be aimed at balancing the prices of commodities in the country,” reads the program. Are the predictions of the CN realistic and is it possible to conduct a rigid monetary policy? According to the former CB chairman Bagrat Yesayan those are not realistic. “The CB should have conducted a more serious analysis of the developments we encountered in 2009. There are no positive incentives noticed in the economy. In the 4th quarter of 2009 the reduction of the rates of slump was comparative and was connected with big slump of economy in the 4th quarter of 2008 but the line of economic plummet still continues. There are still no prerequisites for the growth of economy,” he mentioned. According to him there is little chance for the growth in the agriculture sector and services. “50% of services is the trade sector, where in 2009 growth was noticed only due to the fiscal policy of the government through the fight against shady economy. In fact there was actually no growth here and it’s already obvious that this resource is already worn out. As of the other services then if in the global economy and in countries, which influence us show positive results then those results won’t affect the Armenian economy within this year for sure,” says Asatryan. As of the restriction of the monetary policy then the former CB chair thinks it’s the right thing to do. “I think that the restriction of the monetary policy is a right step. During 2009 the government undertook a very expansive and inclusive policy (in particular in the tax-budgetary sector), which simply meant attaining money from the outside and is considered an injection in the economy with foreign money. This had its negative impact on monetary policy. This situation couldn’t continue too long because its economic efficiency was imperceptible. By involving immense financial means we officially had 14.4% economic recession and in the US expression 30% slump. And this happened in the event when the motives of the world economy in 2009 couldn’t possibly have much impact on us. But as this year the impact of the outside world in the aspect of inflation pressures is going to be more negative and in our economy then I believe the monetary policy should have been restricted,” he mentioned. The ARF faction MP Artsvik Minasyan also thinks that in Armenia the economic crisis is not overcome yet. “And it’s natural that the overcoming of the crisis especially in countries like us is going to be very difficult in the current conditions,” he mentioned. But Minasyan thinks that the restriction of the monetary policy is not very right. “The consequences of a rigid monetary policy are clear. They are going to conduct a policy of expensive money; strict means will be applied in relation to the banks. At any rate this means that the economic initiatives will be strangled one more time,” he said. According to him the CB should do vice versa by trying to relieve the monetary pressure and loan interest rates. “They justify their behavior with their policy to keep the prices stable but they forget that in a country with an extremely high black market rates the tools they apply cannot justify their goals. In other words, the policy of preventing inflation, which the CB is trying to implement by applying the interest rates of re-financing will bring more harm than use,” said the MP. According to him by loosening the pressure and by conducting an expansive policy the CB could have brought the shady companies into the legal field. “But by conducting a restrictive policy they are even more ousting the businesses from the legal filed. And as well all know the black market applies its own rules, which indeed harms the economy of any country,” mentioned Minasyan.