ARMENIAN TRADE BALANCE REMAINS DEEP THROUGH MAY AS EXPORTS DIVE
Venla Sipila

World Markets Research Centre
Global Insight
June 22 2009

Armenia’s external trade gap remains worryingly deep. Indeed, according
to the latest customs-based figures published by the country’s National
Statistics Committee quoted by ARKA News, exports from Armenia during
January-May plunged by 47.8% in annual comparison, amounting to 76.4
billion dram ($208US million). Over the same period, imports totalled
374.8 billion dram, falling by just under 30% year-on-year (y/y) and
bringing the trade deficit for the first five months of the year to
298.4 billion dram. In particular, May saw exports falling by 15%
in month-on-month (m/m) terms, while imports decreased by 16.2%
from April.

Significance:As the continued sharp contraction in exports is
accompanied by an increasingly sharp fall in imports, deterioration
of Armenia’s eternal trade balance has started to decelerate. Then
again, at around 35% of the estimated GDO, the trade gap remains
deep enough to signal marked external financial vulnerability. The
trade deficit is translating further to a deep current-account gap,
the financing of which with non-debt-creating means is challenging in
the current international environment with still tight liquidity and
weak growth. Financial stress is also greatly exacerbated by the fact
that remittance inflows, especially from Russia, have clearly fallen,
as the Russian economy is also struggling with a deep downturn. Then
again, Armenia’s external risks stemming from the depth of the
external financing gap are mitigated by the fact that its access to
concessionary financing remains relatively good, as demonstrated by
its recently approved International Monetary Fund (IMF) loan facility
(seeArmenia: 9 March 2009: ). However, the country still remains in
urgent need of additional financing, and has applied for additional
foreign loans (seeArmenia: 21 May 2009: ).