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Armenian Inflation Eased Again By Strong Harvests

Strong harvests have contributed to a 6 percent drop in overall food prices in Armenia
Strong harvests have contributed to a 6 percent drop in overall food prices in Armenia
YEREVAN -- Consumer inflation in Armenia continued to fall last month amid a seasonal drop in the prices of domestic agricultural products, RFE/RL's Armenian Service reports.

The National Statistical Service (NSS) reported a year-on-year inflation rate of 6.3 percent in July, down from 8.5 percent registered in June and 9 percent in May.

The figure puts authorities in a better position to deliver on their pledges to bring the 2011 inflation rate closer to their maximum target rate of 5.5 percent.

Armenia's consumer price index was up by as much as 11.5 percent in March due to increased international prices of wheat and other imported foodstuffs as well as a 2010 slump in domestic agricultural production caused by bad weather.

The agricultural sector is doing better this year. The NSS data shows the prices of domestically grown potatoes and vegetables falling by an average of 25.6 percent in June and another 35 percent in July. The average cost of fruits was likewise down by 23.3 percent last month.

This translated into an almost 6 percent drop in overall food prices registered by the government agency in July.

Those figures are in-line with government assurances that better harvests will significantly ease inflation in the second half of the year. Some officials predicted early this year that Armenia's agricultural output will grow by 10 percent in 2011.

Despite the first indications of seasonal deflation, the central bank last month decided to keep its benchmark lending rate unchanged at 8.5 percent. The bank raised the minimum cost of borrowing by a total of 1.25 percentage points in January-February as it scrambled to curb higher than anticipated inflation.

Consumer prices in Armenia already soared by more than 9 percent in 2010, one of the highest inflation rates since the 1990s. Socially vulnerable groups in society were hit particularly hard by the rising cost of living. It also complicated government efforts to reduce poverty, which rose considerably during the 2009 economic recession.

On August 2, Samvel Avagian, an economic analyst, downplayed the significance of the latest inflation data. He argued that the national average monthly wage, which the NSS estimated at over 114,000 drams ($310) in June, was up by only 5 percent from the same period of 2010.

"The rise in the average wage is clearly lagging behind the rise in prices," Avagian told RFE/RL. "In reality, the gap between the rises in wages and prices is greater."