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ARMENIA SHOWS STRONG Q3 GDP RESULTS BUT OUTLOOK IS CLEARLY DARKER
IHS Global Insight
December 2, 2014
by: Venla Sipila
According to the latest national accounts results published by the
Armenian National Statistical Service, the economy in the third
quarter of 2014 expanded by 5.3% year on year (y/y). This rate
marks substantial acceleration in growth; second-quarter growth had
been reported at 2.3% y/y, following 3.1% y/y in the first. Further
Statistical Service data, quoted by ARKA News, showed that agricultural
output increased by 2.8%, accounting for nearly 30% of the total
GDP. Meanwhile, the industrial and construction sectors continued to
struggle; industrial output edged up by just 0.4%, while construction
activity contracted by 0.7%. GDP-shares of these two sectors were 15.1%
and 7.5%, respectively.
Services, including domestic trade, accounted for close to 40% of
the total GDP, rising by 2.5%. Suggesting weakening performance, the
latest indicator of economic activity from the National Statistical
Service increased by 3.7% y/y in October, following gains of 5.1%
in September, 4.2% in August and 7.2% in July. Annual growth for the
January-October period was put at 4.2%. The latest economic results
come after some downward revisions to official economic projections.
Indeed, according to ARKA News, the Central Bank of Armenia (CBA)
recently cut its 2014 growth forecast to 3.1-3.6%, down from the
previous projection range of 3.6-4.2%. Meanwhile, the Finance Ministry
now projects 2014 economic expansion at 3.3%. This rate compares to
5.2%, originally targeted in this year's budget.
Significance:The weakening seen in the monthly indicator is more
informative in reflecting the current key trends in the Armenian
economy. The industrial and construction sectors continue performing
weakly. Meanwhile, also the outlook for the service sectors - which
have this year generally performed relatively well - is weak, given
that household consumption is likely to be increasingly suppressed in
the coming months and quarters. This is because the economy is very
dependent on external capital inflows such as workers' remittances,
and these increasingly threatened given the substantially weakened
outlook for the Russian economy, in particular. The Russian downturn
has a negative impact on the Armenian economy also due to its important
role as a trade partner. Consequently, we see major risks to the
government's official 2015 growth projection of 4% as well.
IHS Global Insight
December 2, 2014
by: Venla Sipila
According to the latest national accounts results published by the
Armenian National Statistical Service, the economy in the third
quarter of 2014 expanded by 5.3% year on year (y/y). This rate
marks substantial acceleration in growth; second-quarter growth had
been reported at 2.3% y/y, following 3.1% y/y in the first. Further
Statistical Service data, quoted by ARKA News, showed that agricultural
output increased by 2.8%, accounting for nearly 30% of the total
GDP. Meanwhile, the industrial and construction sectors continued to
struggle; industrial output edged up by just 0.4%, while construction
activity contracted by 0.7%. GDP-shares of these two sectors were 15.1%
and 7.5%, respectively.
Services, including domestic trade, accounted for close to 40% of
the total GDP, rising by 2.5%. Suggesting weakening performance, the
latest indicator of economic activity from the National Statistical
Service increased by 3.7% y/y in October, following gains of 5.1%
in September, 4.2% in August and 7.2% in July. Annual growth for the
January-October period was put at 4.2%. The latest economic results
come after some downward revisions to official economic projections.
Indeed, according to ARKA News, the Central Bank of Armenia (CBA)
recently cut its 2014 growth forecast to 3.1-3.6%, down from the
previous projection range of 3.6-4.2%. Meanwhile, the Finance Ministry
now projects 2014 economic expansion at 3.3%. This rate compares to
5.2%, originally targeted in this year's budget.
Significance:The weakening seen in the monthly indicator is more
informative in reflecting the current key trends in the Armenian
economy. The industrial and construction sectors continue performing
weakly. Meanwhile, also the outlook for the service sectors - which
have this year generally performed relatively well - is weak, given
that household consumption is likely to be increasingly suppressed in
the coming months and quarters. This is because the economy is very
dependent on external capital inflows such as workers' remittances,
and these increasingly threatened given the substantially weakened
outlook for the Russian economy, in particular. The Russian downturn
has a negative impact on the Armenian economy also due to its important
role as a trade partner. Consequently, we see major risks to the
government's official 2015 growth projection of 4% as well.