ArmInfo. The Armenian economy demonstrates high growth rates, the main driver of which is the service sector. This is stated in the September Macroeconomic Review of the Eurasian Development Bank (EDB).
It is noted that economic activity in Armenia in January-July increased by 13.1% y/y. Growth accelerated to 19.4% y/y in July. The largest contribution was made by the service sector and industry (growth by 30.6% y/y and 13.7% y/y, respectively). Active growth is also observed in trade and construction. The strong performance of the industrial and service sectors continue to be supported by strong demand in the country against the background of the peak tourist season and strong demand from non-residents.
The increase in construction volumes is facilitated by the steady growth of mortgage lending. In addition to consumer demand, investment demand also increased. According to the results of H1 2022 , investments in fixed capital increased by 17.7% y/y. It is expected that indicators of economic activity will continue to remain at a high level in H2 2022. Services and trade have been the main driving forces of strengthening the economy during the seven months of this year. output growth in these sectors amounted to 27.5% y/y and 12.5% y/y in January-July, respectively. The service sector has grown through the expansion of banking, software development, transportation, restaurant and hotel business. This is due to an increase in demand against the backdrop of an increase in the number of non-residents, an influx of foreign capital and labor resources, as well as support for domestic demand by remittances. It is expected that these factors will retain their influence on demand throughout the third quarter of this year.
Industry and construction had a positive impact on economic activity in January-July. Industrial production increased by 7.0% y / y due to the growth of manufacturing industries (by 16.4% y / y in January - July) - such as the production of building materials, food, and basic metals. The manufacturing industry is supported by the expansion of domestic demand and supplies abroad.
The negative dynamics of the mining industry continues - the decline in January - July amounted to 9.1% y/y due to the cessation of work at the Teghut copper mine. The robust dynamics of the construction sector continues to support the Armenian economy. The volume of construction works increased by 13.6% y/y in January-July. Growth was boosted by institutional-funded construction. Construction volumes increased mainly in the real estate sectors, supported by strong growth in mortgage lending (up 32% y/y as of July), as well as in transport activities.
The foreign trade deficit increased in January-July compared to the same period last year. The negative balance of trade in goods increased to $1.6 billion over the seven months of this year ($1.0 billion in January-July 2021). This is due to the outstripping growth rates of import value compared to export (respectively 50.1% y/y and 43.9% y/y in January-July). Import volumes increased across all product groups, equipment, mineral products and vehicles made the largest contribution. Inflation in Armenia slowed down to 9.1% y/y in August after 9.3% a month earlier.
The slowdown in consumer price growth was mainly due to price dynamics in the food segment - in August, vegetable prices fell by 5.5% y/y. The cost of services (transportation and recreation) continued to increase at an accelerated pace compared to the dynamics in the previous month. The maintenance of external price pressure and the expansion of consumer demand have a pro-inflationary effect. At the same time, in the last part of the third quarter of the current year, the appreciation of the dram against the basket of currencies restrains the increase in the prices of imported goods. According to EDB analysts, by the end of the year, inflation in Armenia will be around 9.0% y/y.
