ARMENIAN TRADE DEFICIT DEEPENS SHARPLY IN 2008
by Venla Sipila

World Markets Research Centre
Global Insight
January 26, 2009

According to the latest customs-based trade data from the Armenian
National Statistical Service, the country’s trade deficit for last
year as a whole measured 1.022 trillion dram (some $3US.5 billion),
ARKA News reports. This total marks a widening of around 58%
compared with the annual shortfall of $2US.1 billion registered in
2007. Exports in 2008 amounted to 326.9 billion dram, falling by 7.2%
from the previous year, while imports soared by 35% to stand at 1.349
trillion dram for the year. In December alone, exports fell by 8.2%
from November, while imports gained 5.3% on the month.

Significance:The now reported level of trade deficit implies a deficit
to GDP ratio of around 28%, showing deterioration from the 2007 ratio
of 23%. Armenian external balances provided a cause for intensifying
concern towards the end of the year, when exports started to fall
in annual terms at the same time as imports have soared. The trade
figures for the latest months suggest some easing of annual import
growth, and this development should continue as the recent very
rapid economic growth finally seems to be cooling, thus leading to
moderating import demand. Nevertheless, risks related to Armenia
external balances are likely to stay high for some time. Indeed, the
scope for narrowing of the trade deficit is constrained by weakness
of exports, as the outlook for external demand remains very muted
in the current global economic downturn. In addition, the upcoming
increase in the price of gas charged by the Russian energy giant
Gazprom to $154US per 1,000 cubic metres (cm) from $110US per 1,000
cm this year will have an upward impact on the import bill from the
beginning of April 2009 onwards. Thus, especially considering the
weakened outlook for investment and remittance inflows due to the
international financial and economic crisis, Armenia’s wide external
deficit continues to signal significant vulnerability and serve as
a source of considerable financial risks.