Wednesday, October 18 2023 13:12

ArmInfo. The Eurasian Development Bank (EDB) has released the latest Macroeconomic Review for its six member states. This regular publication provides a roundup of the macroeconomic situation and projects near-term developments in the member countries. The review also contains detailed statistics on key macroeconomic indicators.

At the same time, construction growth (+17.3% y/y in January -  August) remains stable against the backdrop of a high level of  mortgage lending. The Armenian economy continues to be supported by  significant volumes of cash receipts - the influx of cross-border  transfers from individuals in January - August of this year increased  by 31.3% year-on-year and amounted to $3.8bln. 

Economic activity in Armenia is weakening after last year's surge,  but remains strong. It is noted that the main role in the increase in  economic activity in Armenia in January - August by 10.4% y/y. played  by the services sector against the backdrop of expanding output by  the information technology, air transport and public catering  industries. Meanwhile, declines in banking and manufacturing  persisted following last year's strong gains in those sectors.

Bank analysts believe that the growth rate of the Armenian economy  will remain high until the end of the year. There is also a  possibility of a higher level of GDP than previously expected due to  an increase in consumer demand in the context of the resettlement of  the population of Karabakh to Armenia.

The foreign trade deficit expanded to $3 billion in January - August  of this year (1.9bln in the same period last year). In January -  August 2023, export supplies increased by 51.8% y/y. In the dynamics  of goods exports, the main role is played by machinery and equipment,  vehicles, precious stones and metals. Import volumes in January -  August increased (+53.8% y/y) for all product groups. The faster  growth rates of imports compared to exports are associated with the  continued high level of domestic consumption and investment, as well  as with the increase in the purchasing power of the Armenian dram  compared to the currencies of the main trading partners.

Price growth in Armenia amounted to 0.1% y/y in September after  declining by 0.2% y/y a month earlier.  A slight acceleration in  inflation is due to the fact that the decline in prices in the food  segment slowed down (minus 3.1% y/y in September after minus 4.0% a  month earlier) and prices for imported fuel (minus 2.4% y/y after  minus 4.2% y/y a month earlier). Service cost growth continued to  slow. The key factors limiting inflation in September were the  strengthening of the Armenian dram and the weakening of external  price pressure. Tight monetary conditions also contributed to the  decline in inflation. By the end of this year, inflation will  accelerate, but will remain below the target range (4+1.5%) of the  Central Bank of the Republic of Armenia.

At the same time, the risks of a more significant acceleration in  price growth increased due to a surge in consumer demand and the  weakening of the dram in late September - early October. At a meeting  on September 12, the Central Bank of Armenia decided to reduce the  refinancing rate for the third time in a row - by 0.5 percentage  points. up to 9.5%. Easing monetary conditions will help accelerate  price growth by the end of 2023 - early 2024. At the same time,  pro-inflationary risks that arose in late September - early October  of this year will limit the regulator's ability to further ease  monetary policy.