Russian experts see tense situation in Armenia

Politics Materials 4 March 2009 14:48 (UTC +04:00)
Russian experts see tense situation in Armenia

Azerbaijan, Baku, March 4 / Trend , A.Badalova/

A tense situation is developing in Armenia due to the sharp rise of the rate of the dollar to the local currency, Russian Alfa Bank Chief Economist Natalia Orlova said.

"The situation will continue to be tense," Orlova told Trend on March 4.

On March 3, the Central Bank of Armenia announced a shift to a floating rate policy.

The announcement caused panic in the country.

ITAR-TASS quoted Armenian Central Bank Chairman Arthur Javadyan as saying that the decision was made in view of deteriorating trade conditions and a slowdown in capital inflows into the country. The decision resulted in a 25-percent rise in the rate of the dollar. Within hours, the rate hit 350-360 drams to one dollar.

Orlova added that if the decision is made to exit the currency market, the exchange rate should find its equilibrium value.

"Usually, this implies further devaluing the national currency," she said.

The Armenian currency is expected to continue to decline in the long run, UniKredit Bank Strategic Planning and Development Department Director Vladimir Osakovski said.

"In the short term, the Central Bank of Armenia is likely to try to stabilize the rate of the dram to prevent an increased panic caused by devaluation. The rates have increased and may increase again," Osakovski told Trend .

According to the IMF, a 1.5-percent economic decline is expected to occur in Armenia in 2009.

Acceleration of inflation is expected in Armenia in the coming months, Osakovski said.

The scale of inflation will depend on the monetary policy of the bank," he said.

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