Tuesday, October 4 2022 14:19

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.