A round-table discussion was initiated and held by Oxfam Armenia and the Economic Development and Research Center (EDRC) with the participation of representatives from RoA Government, international organizations and local NGOs.
Oxfam Armenia and EDRC undertook the project entitled “Monitoring of food prices in Armenia” within Oxfam’s global GROW campaign. Within the project a series of analytical information periodicals on “Prices and Vulnerability in Armenia” was elaborated and published. Each report in the series covers issues deserving public attention including food safety and mechanisms of generating food prices, tendencies of food prices and their impact on the behavior and well-being of consumers. (The reports are available at the website of EDRC – www.edrc.am)
According to the report, the overall level of prices and the tendency of their increase in Armenia are of general concern. These trends may lead to numerous consequences both in terms of development of domestic production and economic growth, as well as managing social risks.
The price increase influences consumer behavior in various income groups of population in different ways. Increase in prices is a burden for all types of families. Some families are able to maintain the previous level and structure of consumption with allocating more funds for food purchase. Other families verify the content of the consumer basket by replacing expensive products with cheaper and less quality ones. The poor groups of population just reduce the level of consumption since they have no alternatives to replace the products they used to buy. By reducing the consumer basket which already does not meet the minimum requirements of food consumption, many people suffer from malnutrition.
The price increase in Armenia has quite profound causes and cannot be addressed merely under the light of application of monetary policy tools. It requires introducing more comprehensive and coordinated policy programmes directed at the development of domestic production on the one hand and provision of social guarantees on the other. This condition generates a larger necessity for local policies to be effective; efforts made in this direction should be extremely consistent, coordinated and honest.
The report brings evidences that price pressures in Armenia are largely conditioned not by demand, but supply factors: the inflation depends on the conditions of supply in individual commodity markets that often has external impact and regulatory influence in certain cases. Hence the restraining of inflation should not merely be on the agenda of the Central Bank of Armenia.
The research suggests avoiding the tremendous impact on price increase through imports regulations which is both a short-term and a long-term issue. It can be mainly achieved through enhancing local production. The latter can also contain price pressures however within a short period of time it is justified in terms of both social and economic outcomes.
The report emphasizes the importance of complex approach aiming to address the issue of price increase and improve its social impact, in particular through:
- · Food security strategy
- · Imports regulation
- · Protection of consumers’ rights
- · Markets regulation
- · Social guarantees and state support
