ARMENIAN JANUARY-MAY GDP SUFFERS SHARP DROP
Venla Sipila

World Markets Research Centre
Global Insight
June 22 2009

The downturn of the Armenian economy is deepening. Indeed, according
to the latest national accounts data from the National Statistics
Service quoted by Reuters, Armenia’s GDP over the January-May period
contracted by no less than 15.7% year-on-year (y/y). Coming after
falls of 9.7% y/y during January-April and 6.1% y/y in the first
quarter, this result marks further acceleration in the annual rate
of output decrease. Moreover, it also compares unfavourably with the
growth rate of 9.8% seen in the first five months of last year. ARKA
News reports that, in May alone, however, GDP increased by 15.6%
from April. For last year as a whole, the economy expanded by 6.8%,
with easing of growth momentum becoming increasingly clear towards
the end of the year (seeArmenia: 23 January 2009:). This followed
several years of double-digit growth.

Significance:The latest figures confirm that the Armenian economy is
in the grip of a sharp downturn, and this year as a whole is expected
to see GDP fall clearly. Sector-specific data testify to broad-based
weakness, with the construction, industrial and agricultural sector
all contracting considerably. The official government forecast
specified in the budget still projects an annual growth rate of
9.2% – a forecast that is clearly too optimistic. Instead, the
Central Bank of Armenia (CBA) recently has cut its own projection
to show a fall of 5.8% in 2009 GDP, whereas a contraction of 3.0%
was foreseen previously. The Armenian economy is currently suffering
from unfavourable terms-of-trade developments, and most of all, from
the sharp drop in remittance and investment inflows from abroad,
due to the current global economic downturn.