Loss of Russian market may trigger deflation: CB

PanARMENIAN.Net - If Armenia is unable to replace the Russian market with alternative export destinations, some products could experience price declines, Central Bank Governor Martin Galstyan said during a press conference.

According to the Central Bank’s assessment, the potential disinflationary effect could reach up to 0.6 percentage points, Sputnik Armenia reports.

“This means that these products will remain in Armenia, increasing supply. Vegetables, mineral and carbonated water, certain alcoholic beverages, and stone fruits are among the categories where we see some sensitivity, and where price declines may occur,” Galstyan said.

He noted that if alternative markets are found and export volumes are maintained, the impact would be significantly more limited.

Galstyan also warned of a risk of deflation if exports decline while supply remains high amid weaker demand.

“If exports fall substantially and we are unable to offset that through other balance-of-payments components in the form of inflows, it could affect the dram-dollar or dram-ruble exchange rates,” the Central Bank governor said.

Asked whether commercial banks could be encouraged to provide temporary relief for farmers with loan obligations, Galstyan said no such discussions have yet taken place with the banking sector. However, he noted that the option is being considered together with government partners.

Russia’s Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) restricted the import of all goods subject to quarantine control from Armenia and their transit through Russian territory to other Eurasian Economic Union countries starting June 12. The restrictions will remain in force until a special mechanism ensuring the safety and traceability of shipments is developed.

Earlier, Rosselkhoznadzor also restricted imports of Armenian flowers. On May 25, it became known that Armenia’s Food Safety Inspection Body had prevented some producers from exporting strawberries to Russia. Beginning May 30, Russia introduced temporary restrictions on imports of fresh tomatoes, cucumbers, peppers, herbs and strawberries from Armenia. Since June 2, imports of stone fruits and grapes have also been restricted, while imports of apples, eggplants, potatoes and dried fruits are scheduled to face restrictions from July 3.