Tuesday, October 22 2024 13:03
Emmanuil Mkrtchyan

Without additional impetus, economic growth rates in Armenia will  return to their stable values - EDB

Without additional impetus, economic growth rates in Armenia will  return to their stable values - EDB

ArmInfo.Since June of this year, re-export of precious metals has ceased to play a significant role in the economy of Armenia, and the contribution of net exports to economic growth in the first half of the year has become negative.  This is stated in the latest Macroeconomic Review of the Eurasian  Development Bank (EDB) for October, published today.

According to the Bank's analysts, excluding re-export, the volumes of  exports and imports of goods have also decreased compared to the same  period of the previous year. The main driver of the Armenian economy  is once again the services sector, with the exception of the IT  sector, which has recorded a decline since the beginning of the year. 

Thus, according to analysts - taking into account the above factors -  a decrease in external demand, restrictions on export competitiveness  due to the strengthening of the dram (by 105% from 2019 as of August  2024), the trend of resource flow to the non-industrial sector (the  share of employment in low- productivity sectors reached 14% in June  2024), as well as the exhaustion of the influence of re-exports in  the rest of the year - economic growth will slow down. Without  additional impetus, growth rates will return to their stable values  (4.5-5%). 

Meanwhile, the review notes that in 2024, economic growth rates  remain high, although they will slow down somewhat. This is primarily  due to a decrease in external demand after high levels in 2022-2023.  It is emphasized that the structure of economic growth changed at the  end of 2023 and the first half of 2024 - the role of industrial  production increased significantly, which provided 1 p.p. growth of  6.5% y/y in January-June against minus 0.3 p.p. in the same period  last year. This is primarily due to the increase in production and  foreign trade in precious metals.

The review notes that the growth indicators of the Armenian economy  for the first eight months remained at a high level. Inflation slowed  down in September and remains below target indicators. The Central  Bank continues to adhere to the course of easing the monetary policy,  having reduced the refinancing rate in September by 0.25 percentage  points - to 7.5%. 

In January-August, the economic activity indicator increased by 9.0%  y/y (5.6% y/y in August). The main contribution to economic growth  for the first eight months of the current year was made by the trade  (20.4% y/y), services (5.2% y/y) and industry (13.7% y/y) sectors. At  the same time, the dynamics of industry has been weakening since the  end of the second quarter due to the slowdown in the growth of the  manufacturing industries. If at the end of the first quarter they  provided almost 40% of economic activity, then in the period from  June to August the contribution of industry was small (0.4 percentage  points, or about 7% y/y16). The slowdown in industry was offset in  August by an acceleration in the trade (14.9% y/y) and services (9.5%  y/y) sectors. 

The persistently high growth rates of construction (16.2% y/y in  January-August) continue to be supported by mortgage lending (26.2%  y/y in August). Economic growth will slow somewhat by the end of the  year - as the impact of the increase in production and export of  precious metals and gold products at the end of last year and in the  first half of this year is exhausted. At the same time, economic  activity will be supported by domestic demand as a result of stable  growth in household lending (22.4% y/y in August) and the  implementation of planned government spending in Q4 2024.

At the beginning of the second half of the year, the services and  trade sectors became the drivers of economic growth. At the same  time, the growth of the manufacturing industry (by 3.8% y/y in August  after 2.5% y/y in July) became less concentrated due to the recovery  of dynamics in the main industries. The production of basic metals  (including gold) increased 3.4 times y/y in January - August (54.2%  y/y in August). 

The acceleration of growth in the services sector was ensured by  financial activities (8.2% y/y in August) and the entertainment and  recreation sector (20.9% y/y in August). The foreign trade deficit  decreased in January - August 2024 to $ 2.3 billion (in January -  August 2023, it was $ 3 billion). According to the results of eight  months, export deliveries increased 2.1 times against the background  of an increase in the production and export of precious metals and  gold products. They account for 67% of the structure of goods exports  (an increase of 7 times y/y in January - August). 

Together with supplies of mineral products, these items provided all  the positive dynamics of exports.  Imports in January-August grew by  59.3% y/y and were also provided mainly by the import of precious  metals for processing and subsequent export (by 6.9 times y/y). The  share of vehicles and mineral products in the import structure  significantly decreased. Excluding trade in precious metals, the  dynamics of both imports and exports in January-August were negative  (minus 9% y/y and minus 11.9% y/y, respectively).

Inflation remains below the target range of the Central Bank of  Armenia, having slowed down to 0.6% y/y in September after 1.3% y/y  in August. This is due to the dynamics of prices in the food segment  - food products fell in price by 1.0% y/y in September after growing  by 1.0% y/y a month earlier. In September, the growth of prices for  services continued to accelerate, amounting to 3.6% y/y after 3.3%  y/y in August.  At the same time, disinflation in the non-food  segment intensified due to a decrease in prices for imported goods.  Inflation remains below the target range of the Central Bank of  Armenia. We forecast price growth at 1.5% y/y by the end of the year. 

The Central Bank has reduced the refinancing rate for the sixth time  this year. At the meeting on September 10, it was lowered by 0.25  p.p. - to 7.5%. The decision was made against the backdrop of weak  inflation and declining inflation expectations. Since the beginning  of the monetary policy easing cycle in the second half of 2023, the  refinancing rate has decreased by a total of 3.25 percentage points.  We expect that at the next meeting of the Central Bank of Armenia, it  will lower the refinancing rate again against the backdrop of weak  price dynamics. 

The state budget balance was formed with a deficit of 0.9% of GDP17  in January-August 2024 (in the same period of 2023, the surplus was  0.8% of GDP). Tax revenues increased by 8.1% y/y, while expenditures  - by 19.4% y/y. And this is 18% of the planned deficit for the  current year in the amount of 4.8% of GDP (60% of planned revenues  and 53% of expenditures), which creates an opportunity to increase  government spending in the coming quarter. At the same time, there  are risks of complications in the implementation of budget  expenditure plans due to slower growth in tax revenues.  

POST A COMMENT
Input digits     


News
Extending Holiday Care to Border Communities: AraratBank`s Gifts Reach 400 Children
EEC action plan for implementation of priorities of Armenia`s  chairmanship in EAEU bodies was intensive - Nikol Pashinyan EEC action plan for implementation of priorities of Armenia`s  chairmanship in EAEU bodies was intensive - Nikol Pashinyan 
Beneficiaries of the Beneficiaries of the "By Your Side" program at IDBank
Ardshinbank has once again been recognized as the Private Bank of the Year and Retail Bank of the Year by the Global Banking and Finance Awards magazine.Ardshinbank has once again been recognized as the Private Bank of the Year and Retail Bank of the Year by the Global Banking and Finance Awards magazine.
Russia values mutually beneficial multifaceted cooperation with its  partners in EAEU - Vladimir Putin Russia values mutually beneficial multifaceted cooperation with its  partners in EAEU - Vladimir Putin 
Gas supplies to Armenia via Georgia to be suspended Gas supplies to Armenia via Georgia to be suspended 
Shorter working hours pose risk to Armenia`s economy - Mantashyants  business clubShorter working hours pose risk to Armenia`s economy - Mantashyants  business club
Economic modernization programme portfolio AMD 341bln as of Dec 1,  2024 Economic modernization programme portfolio AMD 341bln as of Dec 1,  2024 
"Hidden gem" with mountain views is a perfect walking destination for  2025` - Express UK 
Amundi-Acba remains committed to supporting Armenia`s economic progressAmundi-Acba remains committed to supporting Armenia`s economic progress
 Armenia`s ambassador to Spain, Fomento del Trabajo Nacional discuss  development of trade relations between Armenian, Catalan companies  Armenia`s ambassador to Spain, Fomento del Trabajo Nacional discuss  development of trade relations between Armenian, Catalan companies 
Idram Joins the Fight Against Food InsecurityIdram Joins the Fight Against Food Insecurity
Armenia exports wine to Russia, imports from Spain, Italy Armenia exports wine to Russia, imports from Spain, Italy 
7.4% economic activity growth in Armenia in Jan-Nov 20247.4% economic activity growth in Armenia in Jan-Nov 2024
Armenia`s minister of finance explains causes of tax arrears Armenia`s minister of finance explains causes of tax arrears 
Recession in Armenia`s IT sector not linked to Armenia`s fiscal  policy  Recession in Armenia`s IT sector not linked to Armenia`s fiscal  policy  
Ardshinbank Finances the Construction of an Innovative Greenhouse FacilityArdshinbank Finances the Construction of an Innovative Greenhouse Facility
Budget performance leaves to be desired - minister Budget performance leaves to be desired - minister 
Armenia`s Ministry of Finance preparing Eurobond tranche next year Armenia`s Ministry of Finance preparing Eurobond tranche next year 
Armenia`s authorities postpone taxation of the income tax refundArmenia`s authorities postpone taxation of the income tax refund
Economic Competition Protection Commission fines gas-filling stationsEconomic Competition Protection Commission fines gas-filling stations
Yerevan ex-mayor lashes out at incumbent authorities over orice rise Yerevan ex-mayor lashes out at incumbent authorities over orice rise 
Armenia`s financial authorities revise GDP growth down Armenia`s financial authorities revise GDP growth down 
135 applications for comunity programmes worth over AMD 50bln  submitted for coming year 135 applications for comunity programmes worth over AMD 50bln  submitted for coming year 
Yerevan Municipality revises construction permit fees downYerevan Municipality revises construction permit fees down
Armenian budget revenue 9.6% up in Jan-Nov 2024 as compared with  Jan-Nov 2023Armenian budget revenue 9.6% up in Jan-Nov 2024 as compared with  Jan-Nov 2023
Armenia reduces natural gas imports from Russia by 13% in first half  2024Armenia reduces natural gas imports from Russia by 13% in first half  2024
Armenia imports wheat from Russia Armenia imports wheat from Russia 
Extension of operation of 2nd power unit of Armenian NPP discussed Extension of operation of 2nd power unit of Armenian NPP discussed 
Video surveillance bill withdrawn Video surveillance bill withdrawn 
AraratBank Named Large CSR Company of the YearAraratBank Named Large CSR Company of the Year
Russian, Armenian officials to discuss Iran-EAEU cooperation under  comprehensive free trade agreement Russian, Armenian officials to discuss Iran-EAEU cooperation under  comprehensive free trade agreement 
Armenia`s car exports, imports down in first half of 2024Armenia`s car exports, imports down in first half of 2024
Armenia`s oil products imports 16.4% down in first half 2024 Armenia`s oil products imports 16.4% down in first half 2024 
1% idcoin instead of New Year’s suffering: practical tips1% idcoin instead of New Year’s suffering: practical tips
Armenia prefers Russian sugar to Brazilian Armenia prefers Russian sugar to Brazilian 
Almost 850 Armenian trucks in queue at Upper Lars checkpointAlmost 850 Armenian trucks in queue at Upper Lars checkpoint
Yerevan needs waste processing plant - mayor Yerevan needs waste processing plant - mayor 
Investment project for construction of 4th section of Yerevan`s  Circular Boulevardy to submitted to governmentInvestment project for construction of 4th section of Yerevan`s Circular Boulevardy to submitted to government
Energy sector one of major economic branches of Armenia - ministerEnergy sector one of major economic branches of Armenia - minister
Russian government presents results of 23rd meeting of  Armenian-Russian intergovernmental commissionRussian government presents results of 23rd meeting of  Armenian-Russian intergovernmental commission
USD transactions down RUB ones up in in Armenia`s interbank foreign  exchange market Dec 16 to 20USD transactions down RUB ones up in in Armenia`s interbank foreign  exchange market Dec 16 to 20
Idram Junior Donated Books to SchoolsIdram Junior Donated Books to Schools
"Gray deals" involving gold and diamonds seen in private transfers
Overchuk: Trade turnover between Russia and Armenia reached $10.2  billion in the first 10 months of 2024Overchuk: Trade turnover between Russia and Armenia reached $10.2  billion in the first 10 months of 2024
Armenian Deputy Prime Minister: Agricultural trade turnover between  Armenia and Russia increased by 7%Armenian Deputy Prime Minister: Agricultural trade turnover between  Armenia and Russia increased by 7%
Team Telecom Armenia`s Sustainable Development Bonds to be listed at  Armenia Stock ExchangeTeam Telecom Armenia`s Sustainable Development Bonds to be listed at  Armenia Stock Exchange
 EBRD invests $13.5 million  in Team Telecom Armenia`s $75 million  bond issuance  EBRD invests $13.5 million  in Team Telecom Armenia`s $75 million  bond issuance 
Are all funds protected in Russian banks?Are all funds protected in Russian banks?
Global digital cooperation gaining currency in interconnected world -  Armenian NA vice-speaker Global digital cooperation gaining currency in interconnected world -  Armenian NA vice-speaker 
Armenia`s economy minister, C-Quadrat Ampega reps discuss development  of Armenia`s capital market Armenia`s economy minister, C-Quadrat Ampega reps discuss development  of Armenia`s capital market 
RA Embassy in USA hosts special fireside chat on USAID`s lasting  impact in strengthening Armenia`s economic resilience and democratic  governanceRA Embassy in USA hosts special fireside chat on USAID`s lasting  impact in strengthening Armenia`s economic resilience and democratic  governance
Armenia committed to constructive cooperation within BSEC to advance  peace and stability in Black Sea Region and beyond - Armenian FM Armenia committed to constructive cooperation within BSEC to advance  peace and stability in Black Sea Region and beyond - Armenian FM 
Big Christmas Market with Idram, IDBank and idplusBig Christmas Market with Idram, IDBank and idplus
Armenia implements 10 investment projects in Eurasian region - EDBArmenia implements 10 investment projects in Eurasian region - EDB
Armenian government plans to hold IPO for its share in  Zangezur  Copper and Molybdenum CombineArmenian government plans to hold IPO for its share in  Zangezur  Copper and Molybdenum Combine
Armenia, Japan to sign convention abolishing double taxationArmenia, Japan to sign convention abolishing double taxation
EFSD to issue $2mln grant to Armenia to improve financing reporting  quality of government agencies EFSD to issue $2mln grant to Armenia to improve financing reporting  quality of government agencies 
Armenia, Hungary to sign economic cooperation agreementArmenia, Hungary to sign economic cooperation agreement
ZCMC paid AMD 33.249bln to Armenia`s state budgetZCMC paid AMD 33.249bln to Armenia`s state budget
Read more
Exchange rates
26.12.2024
RUB3.980.00
USD396.180.12
EUR412.071.00
GBP496.490.03
CAD275.430.33
JPY25.17-0.04
CNY54.280.02
CHF440.490.47