Saturday, October 1 2016 10:00
Karina Melikyan

Debt burden of economic entities is a bit high but still tolerable, according to Central Bank

Debt burden of economic entities is a bit high but still tolerable, according to Central Bank

ArmInfo. According to the estimations of the Central Bank of Armenia, the debt burden of economic entities is a bit high but still tolerable. This demonstrates that funding becomes harder and harder, Vahagn Grigoryan, Head of the Monetary Policy Department at the CBA, said at a press conference on September 30. "This means that it is necessary to cross over to non- credit funds for healthier and more sustainable economic growth. In all developing countries, where the demand for loans is high, it is necessary to pay attention to the structure of investment financing sources," he said.

According to the Financial Rating of Armenian Banks by the Agency of Rating Marketing Information (ArmInfo), the share of NPLs in the loan book has exceeded the upper threshold of the critical range. In particular, the share of NPLs is already over 16%, whereas the international critical range is 10-15%. There are large lenders to Armenian economy among them. By 1 July 2016, the share of NPLs in the aggregate loan book of the banks rose to 13.2% from 10.5% a year before, and from 6.6% three years before. In the aggregate assets of the banks, the share of NPLs made up 9% by 1 July 2016, versus 7.3% a year before, and 4.5% three years before. The absolute value of NPLs grew by 37% to 310.3 bln AMD, versus 52% growth in H1 2015. The growth slackened due to the significant write-off of unrecoverable loans. In the structure of NPLs, the share of doubtful and unrecoverable loans made up 67%, with the latter exceeding 47% due to the significant growth in the absolute value.

Among the risky loans, year-over-year decline (by 34.3%) was registered only in the supervised loans, while the nonprime loans grew by 52.9%, doubtful loans - by 6%, and unrecoverable ones rose 2.2-fold. In the meantime, the prime loans grew by 5.6% (versus 12.2% rise a year before). Over the past three years, the share NPLs in the absolute terms rose 2.7-fold mostly due to 5.7-fold rise in unrecoverable loans, 2.7- fold rise in doubtful loans, 3.5-fold increase in nonprime loans, while the supervised loans dropped by 10%, and the prime loans rose by 26.4%. Among the economic sectors, the unrecoverable loans in trade made up 21%, in industry - 17%, in agriculture - 16%, in construction and services - 4-8%.

Over the past five years the economic growth slackened from 7.8% to 4.7% (in H1). Industrial output growth slackened from 13% to 8.9%, gross agriculture output growth decelerated from 8.1% to 3.3%, the growth in services slackened from 12% to 8.3%, in trade - from 2.4% rise to 0.3% drop, in power engineering - from 9.1% rise to 4.9% decline, in construction - from 6.7% decline to 7.8% fall. Export growth accelerated from 13.5% to 16.7%, while the 6.7% growth in imports was followed by 3.7% decline, which decelerated the Armenian foreign trade turnover growth from 8.3% to 2.7%.

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