Armenia: New Year with out-of-limit prices?

Armenia: New Year with out-of-limit prices?

In Armenia’s draft state budget for 2018 there is no mention about raising a minimum wage, pensions and social payments for low-income families. The population of the country is getting poorer, and the prices, first of all, for essential goods, are getting higher.

A significant rise in prices of food products in the country has already become commonplace: it has not taken even a month for butter, meat, sugar or cheese - the goods that are included in the consumer goods basket - to become more expensive. Only over the past two or three months, a kilogram of beef on bone in Armenia has risen from 2.4-2.5 thousand to 2.8-2.9 thousand drams, though salaries and pensions remain at the same level. Probably, this is a reason why the increase in prices for essential products in the country is always perceived very sharply and painfully. Such a rise in prices costs a pretty penny for the Armenian consumers.

The situation with butter is even worse: according to the National Statistical Service, in August 2017, the average prices increased by 13.9% compared to August 2016 and amounted to 3.76 thousand drams per kilogram. Today, on the shelves of Armenian shops, the prices for butter start from 4 thousand drams.

Of course, the volume of the butter production in the republic is scanty. So, according to the same data of the National Statistics Agency, for the first 8 months of the current year, the country produced 199.3 tons of the product, which is 22.8% less than in the previous year. But its import, according to the customs service, for the first half of 2017 amounted to 2.3 thousand tons - $ 10.1 mln. And if the situation with prices can be explained by the increase in the cost of imported products, it is impossible to explain the meat prices: it is produced primarily in Armenia, and only for 8 months of this year, it was produced 27.4 thousand tons of meat- almost 5% more than a year earlier, and according to the customs, the imports  was only 23.4 tons for the first half of the year.

The State Commission for the Protection of Competition of the Republic of Armenia is deprived of the function of overseeing the meat market, as there are many small and medium-sized farms operating there. In this market, there are no dominant economic entities, and the commission exercises supervision exclusively on monopolized commodity markets. At the same time, the commission has fixed the increase in prices on the butter market and, considering the fact  that the bulk of the Armenian butter is imported from New Zealand, it has come to the conclusion that the price increase in the country is due to the fluctuations of the international prices in this country: for the year, its cost has increased by 38%.

As for the rise in the meat prices, experts say it is caused by a sharp increase in the export of cattle, as evidenced by the statistics. For the first half of 2017, the exports amounted to 6.9 thousand heads against 1.4 thousand heads for the same period  of the previous year (4.9-fold increase), and the customs value was $ 2.7 million comparing with $ 552.2 thousand. At the same time, 97.1% of exports or 6.7 thousand head were exported from Iraq. The Armenian import can not be taken into account - for six months, it amounted to 315 against 353, respectively. At the same time, the experts are sure, that the rise in the price of local products is unreasonable, as the costs of companies, such as wages and transportation, have not changed. The fact is that the local companies, especially those specializing in the production of dairy products, do not seek to increase production. Another nuance is that Armenian businessmen do not use the opportunities and potential of imports from the EAEU countries, in particular from Russia. As a result, high prices may encourage the population to switch to the cheaper and lower-quality fats, spreads and margarines, which, according to experts, are not very healthy.

However, the new 2018  Armenia is likely to enter with new, even higher prices, which will primarily affect food and consumer goods, the Zhamanak newspaper writes. "In a month, the customs duties on more than 800 types of goods, mainly consumer goods, in particular sugar, meat and butter, will increase,” the newspaper writes. The publication informs that the rise in prices will be mainly due to the fact that from January 1, 2018, the new Customs Code of the EAEU will come into force. This implies that customs duties on goods from countries that are not members of the EAEC will increase.

The rise in prices in Armenia will also be instigated by the new Tax Code of Armenia, which comes into force on January 1. In this case, the excise taxes on gasoline and compressed gas will increase. The excise tax on gasoline will increase from 25 to 40 thousand drams, the newspaper writes.

100 Armenian drams = 12.07 Russian rubles = $ 0, 21