World Markets Research Centre
Global Insight
August 21, 2009

Trade Gap Still Deep in Armenia in July

BYLINE: Venla Sipila

According to figures from the country’s National Statistical Service
reported by ARKA News, exports during January-July totalled $352US.2
million, in an annual contraction of 44.5%. Still marking a dismal
performance, the latest data signal relatively stable, rapid
contraction in exports through July, given that export figures for the
first half the year had earlier showed a decrease of 45.9%
year-on-year (y/y). Meanwhile, imports in the first seven months of
2009 reached $1US.66 billion, falling by 29.5% y/y, and bringing the
trade deficit for the January-July period to some $1US.31
billion. Thus, import contraction modestly strengthened in the very
latest developments, after having fallen by 27.5% y/y during the first
half of the year. In month-on-month (m/m) terms, exports increased by
15.6% in July, while imports retreated by 1.4%.

Significance:Armenia’s trade balance still remains alarmingly deep,
even if the latest data suggest marginal strengthening due to falling
imports. Indeed, first half of the year saw the ratio of the trade gap
to GDP stand at no less than some 34%, and import contraction mainly
reflects weakened domestic demand amid the extremely rapid economic
contraction seen in recent months (seeArmenia: 22 July
2009:). Armenia’s export revenue earnings potential is still weak and
the base for this narrow, whereas the global recession has further
suppressed external performance. The deep trade deficit is further
reflected in a wide gap on the overall current account, which has also
grown due to fallen remittances. Given the high external financing
needs and the considerable fall in foreign currency inflows, Armenian
credit fundamentals stand under increasing threat, and dependence on
external financing signals continued risks to exchange rate
stability. On the other hand, Armenian policy responses to the
increased challenges have been appropriate, securing strong support
from international financial institutions in the form of concessionary
credits.