Global Insight
January 25, 2008

Armenian Trade Gap Widens Sharply over 2007

by Venla Sipila

According to the latest preliminary data from the National
Statistical Agency, Armenian exports over 2007 totalled some $1US.22
billion, increasing by 23.7% compared to 2006, ARKA News reports.
While this rate marks high growth at face value, the increase in
imports far surpassed export growth; imports surged by 49.7% from the
previous year, amounting to around $3US.28 billion for 2007 as a
whole. Thus, the trade deficit for last year came in at $2US.06
billion. Further, it was reported that exports excluding diamonds
trade came in at a total of some $1US.05 billion in 2007, increasing
by 38.7% y/y from the previous year, while imports soared by 58.4%
y/y, reaching $3US.12 billion. Finally,Black Sea Pressreports that in
December alone, Armenia’s total exports increased by 28% y/y and
imports rose by 16.6% y/y.

Significance:Armenia’s trade deficit widened by 73% in 2007 from the
previous year, which is still somewhat more than we expected. The now
reported trade deficit corresponds to some 22% of the annual GDP,
compared with 19% registered for this ratio in 2006. The soaring
trade gap is further reflected in the current account (see Armenia: 2
January 2008: ). The Armenian trade gap is expected to remain fairly
wide over the coming year, as export demand stays weak and the sector
to an extent dependent on diamond trade. In addition, import growth
is likely to remain vigorous, even it if should moderate somewhat
together with overall growth and domestic demand. However, the
government aims to develop regional trade ties, notably with Russia
and Georgia, as well as seeking trade agreements with parties such as
Iran.