EDB expert: Armenian economy maintains high growth rates

ArmInfo.Expansion of export volumes is one of the  drivers of economic growth in Armenia, said analyst at the Industry  research division of the Eurasian Development Bank (EDB) Konstantin  Fedorov. At the same time, the expert notes in the monthly EDB  Monitor, the contribution of domestic demand to overall economic  growth in May 2019 decreased compared to the first months of 2019.  

This is indicated by a slowdown in sales in trade and construction  works in May 2019 to 4 , 9% y -o- y and 2.0% y-o-y, respectively  (according to the results of the first quarter of 2019, 10.1% y-o-y  and 10.8% y-o- y, respectively).

Against the background of positive economic indicators for  January-May 2019, the Central Bank of Armenia raised the forecast for  GDP growth for 2019 to 5.9-7.4% from 4.6-6.1% earlier. Data for May  2019 confirm the recovery of export activity in the second quarter of  2019.

Commodity shipments abroad increased in May by 11.7% y -o- y (to $  208.3 million). For comparison, in the first quarter of 2019, exports  dropped by 8.6% y-o- y. The growth of volumes is determined by the  resumption of ore mining and metal production. Imports declined in  May by 10.5% y-o- y after a substantial increase (by 18.9% y-o-y) in  April 2019.

In May and June, the gradual revaluation of AMD continued. As of the  end of June, $ 1 cost 477 AMD (490 AMD - at the beginning of March  2019). The market has seen an increase in foreign currency offer,  partly due to an increase in the country's income from tourism and  remittances from abroad. The head of the Central Bank of Armenia,  Artur Javadyan, speaking in parliament, said that from April 2019,  the Central Bank of Armenia bought $ 140 million in the foreign  exchange market. This measure prevented the excessive strengthening  of the dram, which could have negative consequences for exporters. At  a meeting of the Central Bank Board on June 12, 2019, it was decided  to keep the refinancing rate at the level of 5.75%. The CBA noted a  temporary increase in inflation in April-May 2019 and expects its  steady recovery to the target level (4%) in early 2022. At the same  time, the regulator does not exclude the possibility of reducing the  rate during the second half of 2019, but so far considers such a  measure as premature.

By the end of June 2019, inflation amounted to 2.5% y-o-y, decreasing  from 2.8% in May 2019. The main factor of inflation remains the rise  in food prices, which amounted to 4.6% y-o-y, while prices for  non-food goods increased by 1.9% y -o-y and services by 0.1% y -o- y.  Inflation dynamics in June is consistent with the current EDB  forecast for 2019, which implies an increase in consumer prices for  2019 by 2.8%.  The expert recalls that the indicator of economic  activity in Armenia in May 2019 increased by 7.3% y-o-y (the growth  in January - May 2019 was 7.3% y-o-y).