Middle East escalation could increase inflation in Armenia, Central Bank chief says

The escalation of tensions in the Middle East could raise inflation in Armenia by between 1.2% and 1.7%, Central Bank of Armenia Governor Martin Galstyan said on Tuesday, warning of mounting external risks to the country’s economy.

Speaking at a press conference, Galstyan said higher global oil prices, the need to switch to alternative import routes and possible disruptions to food imports from Iran could drive price pressures if these risks materialize.

“These are risk scenarios and only if they materialize will they lead to the projected inflationary impact,” he said.

He added that intensifying tensions in the Middle East increase the likelihood of stagflation, slowing economic growth coupled with rising inflation, while a downturn in global economic activity would inevitably weigh on Armenia.

Galstyan also highlighted potential indirect effects, including a decline in tourism, as prospective visitors may be deterred by regional instability.

Trade could also be affected, with possible disruptions to Armenian exports and cargo shipments routed through logistics hubs in the United Arab Emirates, he said.

Referring to developments around Iran, Galstyan warned they could resemble a Syrian-style conflict scenario, which would have severe implications for Armenia if it were to unfold. However, he stressed that such an outcome has not materialized at this stage.

He added that the Central Bank is prepared to take measures to mitigate the economic impact should these risks intensify.