Thursday, July 21 2011 13:40

Foreign exchange loans prevail in lending of Armenian economy


ArmInfo. Despite significant growth in the AMD lending of agriculture, foreign exchange loans remain prevalent in the lending of the Armenian economy.

According to the press service of the Central Bank of Armenia, in late June 2011 as compared with June 2010 economy lending grew by 38%: AMD lending - by 23.5%, foreign exchange lending - by 50.3% (or 49.9% with exchange rate fluctuations exclusive).

In the deposit portfolio the share of USD deposits decreased. As compared with June 2010 AMD deposits grew by 48.8% while foreign exchange deposits - by 18.2%.

Presently there are no global factors that might boost inflation in Armenia. Despite certain volatility in Q2 2010, the world commodity prices were mostly stable.

The influence of the domestic labor market and private money transfers on inflation is neutral, the influence of the taxation and budgetary policies is restrictive. The CB's tough policy, particularly, the decision to raise the official rate from 7.25% to 8.5%, has led to rising AMD rates and lower inflation. Dropping agricultural prices will also contribute to deflation.

The current economic conditions and the more favorable situation in agriculture give ground for the CB to expect target 4% + / - 1.5 inflation this year. In this light, the CB has considered keeping its official rate at 8.5% or reducing it (raised from 8.25% to 8.5% Arp 12 2011 the rate has never been changed since then).

According to the National Statistical Service of Armenia, in May 2011 the amount of deposits grew by 1.4% to 757.4bln AMD ($2bln) (as compared with May 2010 it grew by 18.4%, in Jan-May 2011 - by 7.8%). The share of AMD deposits made up 30.2%, the rest was foreign exchange deposits. The loan book grew by 4.2% in May 2011, by 37.8% as compared with May 2010 and by 15.7% in Jan-May 2011 to 1.043trl AMD ($2.8bln with prolonged and overdue loans exclusive). The share of AMD loans made up 40.2% (9.5% growth in Jan-May 2011), the share of foreign exchange loans - 59.8% (22.6% growth in Jan-May 2011). In May 2011 the interest on AMD loans grew from 17.01% to 17.62% (2.4% drop as compared with May 2010), while that on AMD deposits dropped from 9.37% to 9.22% (0.5% drop as compared with May 2010).
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