Considering large share of imports in the consumption in Armenia, main risks of inflation usually come from abroad. Exchange rate and world commodity prices are major factors for inflation in the country.
– AMD was the most stable currency in the region against USD during last 5 years. In 2020 AMD had short period of depreciation against USD in end-March – start-April after drop in oil price, but returned to stabile rate.
– World commodity prices mainly have dropped and remained low during 2020.


Source: Armstat, Ameria (2020 forecast)

IMF expects that inflation in Armenia will remain as one of the lowest in the region during 2020. June, 2020-to-December, 2019 inflation in Armenia was only 1.0% (0.9pp higher than in 2019), while average 6-month inflation was 0.5% (lower by 1.5pp vs 2019). For comparison annual inflation for first 6 months of 2020 in Georgia: 6.1%, Kazakhstan: 6.4%, Russia 3.3%, for 2020-5m Belarus: 4.9%.

In Armenia “Alcohol, tobacco” has the largest inflation (during first half of 2020) which primarily is explained by continuous increase in excise tax for tobacco. This group registered the highest accumulated inflation during last 4 years due to this reason. Some inflation in food products is compensated by deflation in fuel prices (transport).


Source: Armstat

With our baseline scenario we expect 2020 inflation to be higher than in recent years but will remain in CBA target. Around 3.5% inflation is expected for 2020, mainly due to some increase in food prices (due to lockdown) and increase in healthcare services. Tobacco prices has already increased due to increase in excise tax rates. Decrease in fuel prices will prevent higher inflation. Inflation will be higher if utility prices increase during 2020.