Economist: New influx of Russians to Armenia to cause another wave of inflation

Head of the Management and Business Department of Economics and Management Faculty of the Yerevan State University, economist Karlen Khachatryan has said that the second wave of influx of Russian citizens to Armenia, on the one hand, will lead to a fall in the US dollar, on the other hand, to the intensification of the services and trade sector, which in turn can lead to inflation.

“Of course, a new influx of Russian citizens will affect our economy. The services and trade sectors will greatly intensify. We observed this process in March-April 2022. Of course, there will be an inflow of capital, mainly in the form of US dollars, as a result of which the US dollar exchange rate will fall. Armenia has a relatively small economy, and we are struggling to cope with external changes, so this influx of US dollars is so great compared to our economy that it will lead to a noticeable depreciation of the exchange rate. On the other hand, the intensification of the service sector and trade, in turn, can lead to inflation,” Caliber.Az quotes the economist as saying.

He noted that big problems will also arise in the real estate market, which will lead to great social challenges.

“It turns out that families who rent housing will either lose their houses, because they will be required to move out to rent an apartment at a better price to foreigners, or they will be forced to pay more for housing. This is a serious challenge especially in the current difficult social conditions. It is necessary to take into account that as a result of the war, many settlers from Karabakh rent housing. Students from the districts also rent apartments in Yerevan. Therefore, the rise in prices in the real estate market will lead to big social problems,” Khachatryan said.

He added that this situation, caused by geopolitical processes, cannot last forever, however, even after the departure of the Russians, one should not expect a quick recovery of the previous real estate prices.

“In general, such an inflationary background has been observed in the country since December 2020. It will soon be two years since the beginning of serious inflation in the country. Prices for basic necessities have especially risen, but the state does not react to this, does not undertake any targeted programmes for the socially vulnerable layers of the population. Only two years later, pensions have been increased by only 3,000 drams ($7.35) since September 2022. Of course, this will be unable to somehow neutralise inflation for pensioners who already live in difficult conditions,” the economist said.