EDB: Support for the growth rates of economic activity and GDP in Armenia will be low base of previous year

ArmInfo. The growth of index  of economic activity of Armenia in June 2017 remained at a high level  and amounted to 5.1% by June 2016. The increase in industrial  production in June slowed to 3.8% y / y after a surge in the previous  month by 20% y / In The dynamics of agricultural output in June  reached a positive level (an increase of 3.4% y / y), partly due to  the low base of the previous year. Negative rates of growth remained  in construction (-4.4% y / y). Such data on Armenia's economy are  contained in the July macroeconomic review of the Eurasian  Development Bank (EDB) for EDB member countries.

It is noted that in the second half of 2017, in addition to the  recovery dynamics of consumer activity, support for the growth rates  of the economic activity and GDP index of Armenia as a whole will be  supported by the low base of the previous year. Against this  background, GDP growth is expected to grow at the level of 5.4% in  2017. Increase in retail trade turnover in June slowed slightly to  3.5% y / y after growing by 9% and 9.5% y / y in previous months,  which may partly be due to a slowdown in the growth of remittances in  June.

Negative balance of foreign trade balance in the first half of 2017  on 30% (USD 190 million) exceeded the level of the same period of the  previous year. In June, the growth of imports of goods (29% y / y)  was preserved in comparison with exports (19% y / y) versus the  background of consumer demand recovery.  One of the main directions  for expanding exports is Russia (an increase of 27.1% y / y in  January-June), facilitated by the recovery of economic activity in  Russia and the dynamics of the exchange rate (weakening of the  nominal exchange rate of the dram to the Russian ruble in  January-June 2017 By 21.3% compared to January-June 2016).

Annual inflation in June remained in the area of positive indicators  and amounted to 1.1%. Against the backdrop of a recovery in economic  activity and an increase in the inflationary impact of domestic  demand, inflation will gradually recover and at the end of 2017 we  are expected to reach 2.3%.

Remained dynamics of remittance volumes are preserved. Support for  domestic demand and economic activity in general continues to be the  growth of remittances from abroad. According to the Central Bank of  Armenia, the positive growth in remittances of individuals in dollar  terms increased in June 2017 by 9.1% yoy, while the increase in money  transfers from Russia amounted to 8.9% yoy. The surplus of the state  budget in June amounted to 1.7 billion drams. In January-June, the  deficit decreased more than twofold compared to the same period in  2016 and amounted to 38.3 billion drams. According to the budget  rule, in 2017, the budget deficit should not exceed 152 billion  drams. The growth of budget revenues for January- June 2017 amounted  to 6.3% yoy, while expenses fell by 1.8% yoy.

The macroeconomic round-up section is noted that despite the positive  dynamics of the first half of the year in the field of economic  recovery of the countries participating in the Eurasian Development  Bank (EDB), which continued in June, in most countries of the region,  risks for these positive trends have been outlined.  The report  emphasizes that against the background of the depreciation of  exchange rates and the growth of inflationary pressure, central banks  (except the National Bank of the Republic of Belarus) suspended the  reduction of the key rate by July, which was accompanied by a  tightening of the rhetoric of regulators. In addition to reducing the  possible scale of stimulating economic activity by lowering interest  rates, in most EDB countries in the first half of the year a  significant reduction in the budget deficit was registered, which is  partly dictated by the need to reduce the vulnerability of state  budgets in relation to commodity price volatility or the desire to  prevent high public debt growth. With the reduction of monetary and  budgetary incentives, the prospects for further recovery of EDB  countries will largely depend on structural measures to increase  investment growth and increase exports. "However, in these segments  of the economy there are challenges - after restoring the growth of  mutual trade and exports, further recovery dynamics of exports  without support from commodity prices may prove more difficult,  especially after the period of recovery of exchange rates of  currencies and real wages," noted the chief Economist of the EDB  Yaroslav Lissovolik.

The Eurasian Development Bank (EDB) is an international financial  organization established by Russia and Kazakhstan in January 2006 to  promote the development of the market economy of the participating  countries, their sustainable economic growth and the expansion of  mutual trade and economic ties. The authorized capital of the EDB is  7 billion USD. The Member States of the Bank are the Republic of  Armenia, the Republic of Belarus, the Republic of Kazakhstan, the  Kyrgyz Republic, the Russian Federation and the Republic of  Tajikistan.