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ARMENIAN ECONOMIC ACTIVITY PICKS UP IN MAY, BUT GOVERNMENT CUTS 2014 GROWTH PROJECTION
IHS Global Insight
July 15, 2014
by Venla Sipila
The latest Indicator of Economic Activity published by the Armenian
National Statistical Service puts economic expansion in May at 5.1%
year on year (y/y). Following growth rates of 4.5% y/y in April and
4.1% y/y in May, this brings January-May growth to 4.0% y/y. While
these results suggest strengthening annual growth over 2014 so far,
performance this year has disappointed. In particular, industrial
output and construction sector activity have been struggling. The
latest quarterly national accounts data, which recently have fairly
well corresponded with the economic activity indicator, had put
first-quarter GDP growth at 3.1% y/y (seeArmenia: 3 June 2014:Armenia
starts 2014 with muted growth as construction and industry struggle).
As reported byArmenia Now, the Armenian government has decided
to lower its economic growth forecast for 2014 to 4.0% from 5.2%
determined in the budget plan.
The weaker outlook partly draws from external developments, as the
Russian-Ukrainian crisis is damaging the region. Notably, Armenia is
likely to be hit by lower workers' remittances from Russia, as its
economy is suffering as a result of sanctions. For 2015 and 2016,
the Armenian government projects economic growth at 5.0% and 5.3%,
respectively. Also these forecasts have been revised down compared
with the respective targets of 6.3% and 6.4% cited by the previous
government. While official projections originally put 2013 growth at
7%, annual expansion came in at just 3.5%.
Significance:The weak growth performance signalled by the latest
economic activity indicator fits our expectations, while the
downgraded government GDP forecast for 2014 brings it nearer to our
current baseline forecast of 4.2%. Given the external and domestic
challenges, risks to this forecast still weigh on the downside. Real
growth will continue to be undermined by rising electricity prices,
even if these will climb by less than last year. Looking forward,
we see even the lowered official growth targets for 2015-16 as too
ambitious. The domestic trade sector has been among the best performing
economic sectors this year, but activity there will be suppressed by
the recently introduced mandatory pension contribution.
Finally, given the importance of the Russian economy for Armenia,
not least due to the role of remittances, the ongoing Ukrainian crisis
poses major risks to the outlook.
From: A. Papazian
IHS Global Insight
July 15, 2014
by Venla Sipila
The latest Indicator of Economic Activity published by the Armenian
National Statistical Service puts economic expansion in May at 5.1%
year on year (y/y). Following growth rates of 4.5% y/y in April and
4.1% y/y in May, this brings January-May growth to 4.0% y/y. While
these results suggest strengthening annual growth over 2014 so far,
performance this year has disappointed. In particular, industrial
output and construction sector activity have been struggling. The
latest quarterly national accounts data, which recently have fairly
well corresponded with the economic activity indicator, had put
first-quarter GDP growth at 3.1% y/y (seeArmenia: 3 June 2014:Armenia
starts 2014 with muted growth as construction and industry struggle).
As reported byArmenia Now, the Armenian government has decided
to lower its economic growth forecast for 2014 to 4.0% from 5.2%
determined in the budget plan.
The weaker outlook partly draws from external developments, as the
Russian-Ukrainian crisis is damaging the region. Notably, Armenia is
likely to be hit by lower workers' remittances from Russia, as its
economy is suffering as a result of sanctions. For 2015 and 2016,
the Armenian government projects economic growth at 5.0% and 5.3%,
respectively. Also these forecasts have been revised down compared
with the respective targets of 6.3% and 6.4% cited by the previous
government. While official projections originally put 2013 growth at
7%, annual expansion came in at just 3.5%.
Significance:The weak growth performance signalled by the latest
economic activity indicator fits our expectations, while the
downgraded government GDP forecast for 2014 brings it nearer to our
current baseline forecast of 4.2%. Given the external and domestic
challenges, risks to this forecast still weigh on the downside. Real
growth will continue to be undermined by rising electricity prices,
even if these will climb by less than last year. Looking forward,
we see even the lowered official growth targets for 2015-16 as too
ambitious. The domestic trade sector has been among the best performing
economic sectors this year, but activity there will be suppressed by
the recently introduced mandatory pension contribution.
Finally, given the importance of the Russian economy for Armenia,
not least due to the role of remittances, the ongoing Ukrainian crisis
poses major risks to the outlook.
From: A. Papazian