The main topic of discussions concerning the economy in the recent period is the growth of prices. Several days ago the statistical service published the dynamics of price growth in the period of January-August, informing that Armenia hit a record with the inflation rate among the countries of the CIS.
Products subject to inflation in 2005-2010. August 2010 compared to 2005 (%).
One of the newspapers writes the following about this matter: “RPA member MP Gagik Minasyan spoke of the inflation rate of 7,7% in Armenia, and he said that it is really high and said that he hoped in the end of the year it could go down to the planned level of 5,5%.” It’s good to be optimistic but not everyone can be optimist. Eventually the inflation rate for the 12 months (August 2010 compared to August 2009) not 7.7% but 9.6%.
The upper limit envisaged by the budget is 5.5%. The budget is a law that cannot be violated. It means that the prices should significantly decrease to fit with the limits envisaged by the budget. Why should the prices go down? Will the prices be reduced generally? The answers to these questions were given by the institutions in charge of regulating the inflation as established by the Constitution, i.e. the Central Bank. Before answering these questions the CB tried to find out the reasons why the inflation rate exceeds the allowed limits. “The council has found out that the inflation growth is conditioned by the processes in the international markets of grain and agricultural products, specifically bread, potato and fruit. As the council finds that even though the inflation rate is significantly higher than the allowed limit, it is a result of supply shocks, which hardly can continue long. It is expected that during the coming 12 months the inflation will slowly go down to the upper limit of the planned rate,” writes the CB refinancing interest rate protocol. On the one hand they say it is a result of shock, on the other hand they ignore the fact that shock can never be foreseen. The CB is optimistic but not as much as Gagik Minasyan as they do not say that it may be 5,5%.
Ultimately it is not important because in our country the prices do not depend on the policies of ministries, the CB or other state institutions but separate people. Even people do not care about the statistics on the inflation rates. For example, if we believe the statistics, it means that the consumer price index makes 132.1 compared to 2005. This means that during the past 5 years the prices have grown by 32.1% only. This is very suspicious and we will bring an example to understand it. In 2005 a couple would survive with 150,000 dram a month, and according to the statistics, they have to spend only 48.150 more to get the same products and services.
Even more, if we believe the statistics, in our country people can live with their salary and even save money. Thus, according to the information of the National Statistical Services, the average salary use to be 52.040 dram in 2005, and now it is 106.232 dram. In fact the prices have grown by 32% during the past five years, and the salaries have grown more than twice. This is how the official statistics can convince the poor that they live better now. Certainly, there are products that raised their prices faster than the average nominal salary.