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Armenian Growth Decelerates Sharply In October

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  • Armenian Growth Decelerates Sharply In October

    ARMENIAN GROWTH DECELERATES SHARPLY IN OCTOBER
    Venla Sipila

    Global Insight
    December 1, 2011

    According to the latest indicator of economic activity published by
    the Armenian National Statistical Service, as reported by ARKA News,
    the economy expanded by 2.6% year-on-year (y/y) in October. This
    marked a considerabe deceleration from the September rate of 9.0% y/y.

    Moreover, activity compared to September contracted by 17.9%. The
    latest developments resulted in growth of 5.9% y/y in the
    January-October period. More detailed data testify to a contraction of
    25% y/y in construction activity in October, while industrial output
    increased by 14.3% y/y. Agricultural output increased by 7.7% y/y,
    while its seasonal fall of some 36% from September seems to explain
    a large part of the overall m/m contraction of the economy.

    In addition, it was reported that both exports and imports in October
    increased by around 21% y/y, while exports plunged by 21% from
    September, as imports rose by 2.3% m/m. The resulting trade deficit
    for October measured some USD278 million. These results compared
    to respective export and import growth rates of 33.5% y/y and 12%
    y/y in January-September, while the trade gap for the first three
    quarters of the year came in at some USD2.0 billion.

    Significance:Deceleration in Armenian growth well fits IHS Global
    Insight's expectations. The reasonably resilient growth to date this
    year should still secure annual GDP growth close to the government's
    official forecast of 4.6%. The Armenian economy, including its export
    sector, has benefited from high global commodity prices this year
    which have supported the mining industry. In addition, the recovery of
    agricultural production following the dismal performance last year has
    played a key role, also benefiting the external balances by suppressing
    food product imports. The outlook for economic performance in the next
    quarters is decidedly weakening, and risks regarding both GDP and
    external balances are high and rising. This is because the outlook
    for global and European economic performance is severely clouded at
    present, not least due to the deep Eurozone sovereign debt crisis. The
    impact from deterioration in the external economic environment would
    be felt in lower inflows of very important remittances.

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