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ARMENIA STARTS 2014 WITH MUTED GROWTH AS CONSTRUCTION AND INDUSTRY STRUGGLE
IHS Global Insight
June 3, 2014
Venla Sipila
According to the latest national accounts data from the National
Statistical Service, Armenia's GDP in the first quarter of 2014 grew
by 3.1% year on year (y/y). This result compares to annual growth of
3.5% in 2013 as a whole, and a stronger gain of 7.2% in 2012.
Preliminary detailed data showed that the volume of industrial
output in January-March contracted by 2.8% y/y, while construction
activity edged up by a modest rate of 0.7% y/y. Meanwhile, agricultural
production rose by 5.2% y/y. Also the service sector fared relatively
well, with domestic trade turnover rising by 4.5% y/y, and other
services expanding by 3.5% y/y. Trade was supported by an increase
of 6.6% in nominal wages. Suggesting growing real wages, consumer
prices in the same period had increased by a lower rate of 4.6%
y/y. The Statistical Service also reported that exports in the first
quarter climbed by 1.8% y/y, while imports edged up by 0.2% y/y.
Significance:The latest preliminary macroeconomic data confirm
that the Armenian economy is currently performing at a relatively
muted rate. While perhaps respectable at face value in international
comparison, the recent growth rates have been weak in the Armenian
context, taking into account the need to reduce poverty in the country,
and to catch up with more developed economies. The weakness of the
industrial and construction sectors, in particular, is notable.
Then again, at least, the construction sector has recovered from its
deep contraction in 2013. The central bank is seeking to support
economic activity with interest rate cuts - and this may have
somewhat helped the construction sector to find financing - while
fiscal policy this year is also relatively accommodative. Activity in
the trade sector has recently strengthened, but potential for further
improvement is suppressed by the recently introduced mandatory pension
contribution. Assuming that the important agricultural sector continues
performing well this year, growth at least around the current levels
should be sustained in the coming quarters, even as both the domestic
and external economic environment is fragile.
IHS Global Insight
June 3, 2014
Venla Sipila
According to the latest national accounts data from the National
Statistical Service, Armenia's GDP in the first quarter of 2014 grew
by 3.1% year on year (y/y). This result compares to annual growth of
3.5% in 2013 as a whole, and a stronger gain of 7.2% in 2012.
Preliminary detailed data showed that the volume of industrial
output in January-March contracted by 2.8% y/y, while construction
activity edged up by a modest rate of 0.7% y/y. Meanwhile, agricultural
production rose by 5.2% y/y. Also the service sector fared relatively
well, with domestic trade turnover rising by 4.5% y/y, and other
services expanding by 3.5% y/y. Trade was supported by an increase
of 6.6% in nominal wages. Suggesting growing real wages, consumer
prices in the same period had increased by a lower rate of 4.6%
y/y. The Statistical Service also reported that exports in the first
quarter climbed by 1.8% y/y, while imports edged up by 0.2% y/y.
Significance:The latest preliminary macroeconomic data confirm
that the Armenian economy is currently performing at a relatively
muted rate. While perhaps respectable at face value in international
comparison, the recent growth rates have been weak in the Armenian
context, taking into account the need to reduce poverty in the country,
and to catch up with more developed economies. The weakness of the
industrial and construction sectors, in particular, is notable.
Then again, at least, the construction sector has recovered from its
deep contraction in 2013. The central bank is seeking to support
economic activity with interest rate cuts - and this may have
somewhat helped the construction sector to find financing - while
fiscal policy this year is also relatively accommodative. Activity in
the trade sector has recently strengthened, but potential for further
improvement is suppressed by the recently introduced mandatory pension
contribution. Assuming that the important agricultural sector continues
performing well this year, growth at least around the current levels
should be sustained in the coming quarters, even as both the domestic
and external economic environment is fragile.