ROBUST ARMENIAN GROWTH PERSISTS IN FEBRUARY
by Venla Sipila

Global Insight
March 25, 2008

According to the Armenian National Statistical Service, the country’s
economy expanded by 10.1% year-on-year (y/y) over January-February,
ARKA News reports. This rate signals relatively stable growth in
February, as January expansion had earlier been reported at 9.9% y/y.

During January-February last year, the Armenian economy had expanded
by 9.2% y/y. In particular, construction activity surged by 22.9%
y/y over the first two months of this year. Further, it was reported
that in February alone, construction soared by nearly 60% from
January, boosting month-on-month (m/m) GDP growth to 18.8%. Industrial
production increased by 3% y/y over the first two months of the year,
while output of precious stones rising by 4.3% y/y. Agricultural
production only managed a marginal growth rate of 0.4% y/y for the
two-month period. Further, expansion of the service sector as a whole
was reported at 11.8% y/y, while retail trade turnover increased by
9.4% y/y. Over the whole of 2007, the Armenian economy grew by 13.8%
(see Armenia: 23 January 2008: ).

Significance:The Armenian budget for this year specifies an annual
growth target of 10%. Armenia has seen six consecutive years of
double-digit growth rates, but this is not sustainable. Our latest
projection put Armenian annual growth in 2008 at 8.4%. Indeed, we
still expect that some moderation in Armenia’s economic expansion
is in sight, but the latest data confirm that Armenian growth seems
to be somewhat more persistent than we previously thought, fuelling
concerns over overheating. Although the extremely high growth rates
seen in recent years have been combined with reasonably moderate
inflation rates, price rises have recently intensified.