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World Markets Research Centres
Global Insight
August 22, 2008
Armenian Trade Gap Remains Deep in January-July as Export Growth
Stalls
by Venla Sipila
The latest trade figures from the Armenian National Statistical
Service give little hope of any swift improvement in Armenia's
external balances. Indeed, the first seven months of 2008 saw
Armenia's exports fall by 0.2% in annual comparison, totalling 192.6
billion dram ($640US million) for the seven-month period, ARKA News
reports. At the same time, imports surged by 40.9% y/y and totalled
703.4 billion dram. Over July alone, exports increased by 8.7% while
imports grew by 10.5% from June. July developments brought the trade
deficit for the first seven months of 2008 to 510.8 billion dram. Over
last year, Armenia's trade gap soared by 73% from 2006, totalling over
$2US billion.
Significance:Persistently very robust domestic demand keeps fuelling
imports. While high international commodity prices have boosted import
value, the strong appreciation trend of the dram, on the other hand,
has had the opposite effect as a strengthening exchange rate has made
imports more affordable in dram terms. However, there still should be
some scope for appreciation before a clear deteriorating effect on
export competitiveness is likely to take hold. However, at the same
time, export potential remains limited, to an extent dependent on
diamond trade. Thus, it would be important for Armenia to continue
firmly on its well-started structural reform path, so that its export
earnings capacity improves before dram strengthening starts to have a
clear deteriorating effect on external competitiveness. Given that
domestic demand is holding surprisingly well, imports are likely to
keep growing at a rapid rate in the near term. Moreover, Armenia has
agreed with Russia to bring gas prices charged by Russia's Gazprom to
market prices by 2011, and this will boost the import bill looking
forward.
Global Insight
August 22, 2008
Armenian Trade Gap Remains Deep in January-July as Export Growth
Stalls
by Venla Sipila
The latest trade figures from the Armenian National Statistical
Service give little hope of any swift improvement in Armenia's
external balances. Indeed, the first seven months of 2008 saw
Armenia's exports fall by 0.2% in annual comparison, totalling 192.6
billion dram ($640US million) for the seven-month period, ARKA News
reports. At the same time, imports surged by 40.9% y/y and totalled
703.4 billion dram. Over July alone, exports increased by 8.7% while
imports grew by 10.5% from June. July developments brought the trade
deficit for the first seven months of 2008 to 510.8 billion dram. Over
last year, Armenia's trade gap soared by 73% from 2006, totalling over
$2US billion.
Significance:Persistently very robust domestic demand keeps fuelling
imports. While high international commodity prices have boosted import
value, the strong appreciation trend of the dram, on the other hand,
has had the opposite effect as a strengthening exchange rate has made
imports more affordable in dram terms. However, there still should be
some scope for appreciation before a clear deteriorating effect on
export competitiveness is likely to take hold. However, at the same
time, export potential remains limited, to an extent dependent on
diamond trade. Thus, it would be important for Armenia to continue
firmly on its well-started structural reform path, so that its export
earnings capacity improves before dram strengthening starts to have a
clear deteriorating effect on external competitiveness. Given that
domestic demand is holding surprisingly well, imports are likely to
keep growing at a rapid rate in the near term. Moreover, Armenia has
agreed with Russia to bring gas prices charged by Russia's Gazprom to
market prices by 2011, and this will boost the import bill looking
forward.