Foreign investments in Armenian economy keep declining, while capital outflow gains momentum

ArmInfo. In Jan-Sept 2016, the  net inflow of foreign investments in the real economy of Armenia  dropped by 72% versus Jan-Sept 2015, and totaled 27 bln AMD ($57  mln), while the direct foreign investments (DFI) fell by 45% to 44.4  bln AMD ($94 mln), according to the National Statistical Service of  Armenia. 

The source says that the capital outflow fell mainly on Russia, and  the net flow of investments totaled negative 72.8 bln AMD (7-fold  drop as compared to Jan-Sept 2015) versus positive 14.2 bln AMD a  year before (down 62.8% versus Jan-Sept 2015). The DFIs from Russia  fell almost 6-fold from positive 14.4 bln AMD to negative 55.4 bln  AMD (versus 70.4% decline a year before). 

Along with this, most of the partner countries reduced investments in  Armenia's economy, and only Cyprus, the UK and Luxembourg increased  their investments, holding the top three positions in terms of the  investment amount. In Jan-Sept 2016, the net flow of investments from  Cyprus rose almost 12-fold to 38.2 bln AMD, those from the UK - more  than 4-fold to 31.7 bln AMD, while those from Luxemburg - by 3.5% to  29.2 bln AMD. A year before, investments from Luxemburg grew 4-fold,  while Cyprus and the UK reduced investments by 89.6% and 32.1%  respectively. At that time, Luxemburg was among the TOP- 3, while the  first and second positions belonged to Switzerland and Germany, with  Russia and the UAE being the fourth and the fifth, respectfully. Now  the UAE holds the fifth position, while the United States is the  fourth. Both have considerably reduced both the total amount of  investments and the DFIs. 

In terms of DFIs, Cyprus, the UK and Luxemburg hold the top three  positions, while the rest of the partner countries reduced the DFIs  (most of them - to the negative level due to the prevalence of  outflow).  

In Jan-Sept 2016, Cyprus invested mainly in tourism and partly in  telecommunications, retaining small amounts of investments in  wholesale trade and power engineering, reducing investments in  production of base metals and extraction of metallic ore, and zeroing  out the investments in mining. The UK invested mainly in mining, as  well as in production of beverages, base metals and tourism, zeroing  out the investments in pharmacy. Luxemburg invested mainly in  electric power and gas supply, as well as in production of beverages.  The USA kept investing mostly in power engineering and partly in  tourism, IT, financial sector and research sector, zeroing out the  investments in construction and wholesale trade. The UAE invested  mainly in retail trade and partly in production of electric  appliances. 

Russian investments declined in such fields as power and gas supply,  extraction of metallic ore, mining sector, production of main metals,  computers, electric and optic equipment, machines and mechanisms  wholesale and retail trade, transport field. Insignificant amount of  Russian investments still remain in metallurgic industry, food  industry, production of clothes and leather goods, tourism field,  telecommunication sector and financial system, while investments in  pharmaceutical field and construction have zeroed. 

Direct flow of investments (27 bln drams and FDI-44.4 bln drams) were  distributed in the following way:  35 bln in the field of tourism  (33.8 bln of which are FDI) with 9-fold y-o-y growth, 30.7 bln, out  of which 30.5 bln are FDI in mining industry (8.5-fold growth y-o-y),  8.5 bln- housing construction (2-fold y-o-y growth up from negative  trend), 6.7 bln in telecommunications field (2-fold y-o-y growth up  from negative trend), 6.5 bln in production of cigarettes (4-fold  y-o-y growth up from negative trend). In the other fields outflow of  investments has been registered mainly from such sectors as  extraction of metallic ore, power and gas supply, mining field,  production of main metals, air transport.

To note, according to the revised November forecast by the World Bank  the share of net flow of direct foreign investments in GDP will grow  from 1.6% in 2015 to 2.5% in 2016 and will remain on that level in  2017 as well, after which in 2018 will slightly decline to 2.4%.  (Exchange rate of AMD against dollar totaled 476.45 drams/$1 as of 30  September 2016). According to the National Statistical Service of  Armenia in 2015 direct flow of foreign investments into Armenia's  economy declined by 26.1% to 123.7 bln drams or $255.6 mln. FDI  declined in 2015 by 39.9% to 70.4 bln drams or $145.6 mln.