ArmInfo. The services sector remains the main driver of economic growth in Armenia. Inflation remained unchanged in February. The negative balance of merchandise trade declined against the backdrop of faster growth in the value of exports over imports. The course of dram has risen. This is stated in the March "Macro Review", prepared by analysts of the Eurasian Development Bank (EDB).
According to the report, the economic growth of Armenia, according to the preliminary data of the statistical committee, amounted to 12.6% in 2022 - close to the forecast of EDB analysts. Moreover, financial and insurance activities, trade and the sector of information and communications (an increase of 46.9%, 16.8% and 45.9%, respectively) made the biggest contribution to the dynamics of GDP, providing almost half of the economic growth. In terms of demand, consumer spending (+8.1% y/y) and net exports were the main drivers. The physical volumes of exports of goods and services increased by 54.4% y/y, and the share of exports reached 48% of GDP (35% in 2021). EDB analysts expect that demand will gradually stabilize this year, and economic growth will be 4.2%.
Economic activity in Armenia increased by 10.5% y/y in January after 12.8% y/y a month earlier. The trend of a gradual slowdown in growth continued at the beginning of this year. This is mainly due to the dynamics of the sectors of services, trade and industry, which indicates the gradual stabilization of demand in the country.
The volume of cross-border transfers of individuals from the Russian Federation in January ($254 million) decreased compared to the previous month ($362 million), but remains significantly higher than the level of the entire first quarter of 2022.
At the beginning of the year, strong dynamics continued in almost all sectors of the Armenian economy. The service sector showed an increase of 25.9% y/y in January, 70% of the dynamics was provided by the expansion of the sectors of information and communication and financial activities (+52.5% y/y and +30% y/y, respectively, in January). The construction and manufacturing industries also showed strong momentum. Manufacturing industries grew by 7.3% y/y in January. At the same time, the decline in the mining industry continued (-3.4% y/y). The volume of completed construction works in January increased by 12.2% y/y, this was facilitated by construction financed from the funds of organizations (+13.3% y/y), including foreign investors, as well as from the state budget (2.1-fold y/y). Almost half of the volume of construction work was carried out in housing construction against the backdrop of high growth rates of mortgage lending (+29.5% y/y and 1.3% on the previous month as of the end of January).
The negative balance of trade in goods decreased in January compared to January 2022. The foreign trade deficit amounted to $154 million against $166.5 million a year earlier. Exports continue to outpace imports in terms of growth in value, while , deliveries have almost doubled year-on-year over the past six months- 1 25.9% y/y, 17.7% y/y and 1.4% y/y, respectively, in January after 27.9% y/y, 23.9% y/y and 2.7% y/y a month earlier.
Vehicles, machinery and equipment, precious stones and metals are is played the main role in the dynamics of exports of goods (+2.3-fold y/y in January). Import volumes increased (+72.5% y/y in January) in all commodity groups. In January, the volume of imports exceeded exports 1.3-fold alone, and in the same period last year they exceeded almost twice. The maintenance of the growth rates of goods exports exceeding imports, among other things, contributes to the stable appreciation of the Armenian dram.
Inflation in Armenia amounted to 8.1% y/y in February, unchanged from the previous month. Such dynamics is associated with the acceleration of price growth in the food segment, mainly due to the increase in the cost of vegetable products. Inflation was held back by the continued slowdown in price growth for all other food and non-food products. Prices for services continued to rise in January on the back of strong consumer demand. The main factors limiting the rise in prices are the revaluation of the Armenian dram and the weakening of external price pressure on imported goods. Core inflation also continues to slow down to 9.1% y/y in January from 9.5% y/y a month earlier. According to the results of the first quarter, according to EDB analysts, inflation will be close to 7.2% y/y. EDB analysts forecast price growth at 4.6% y/y by the end of this year.
Taking into account the high level of consumer demand and the stabilization of price growth, analysts assume that the refinancing rate will remain at the current level in March. As a result of February, the Armenian dram revaluated against the basket of currencies of the trading partner countries compared to the same period of the previous year. The dram appreciated against the US dollar by 18.0% y/y, against the euro - by 22.5% y/y, against the Russian ruble - by 12.8% y/y. The revaluation of the dram continues to be supported by the high level of remittances and the outpacing growth of exports compared to imports.
The public debt of the Republic of Armenia as of the end of January 2023 decreased to 55% of GDP ($10.6 billion) from 72% of GDP at the beginning of 2022. This was facilitated by the rapid growth of GDP, the appreciation of the dram and the decrease in the level of external debt.