THE ECONOMIST: ARMENIA HAS BEGUN TO RECOVER FROM ECONOMIC CRISIS

ARMENPRESS
MAY 12, 2010
YEREVAN

YEREVAN, MAY 12, ARMENPRESS: Armenia has begun to recover from its
first serious economic crisis since the early 1990s. Data from the
National Statistical Service (NSS) reveal that real GDP rose by 5.5%
year on year in the first quarter of 2010. Growth was supported by
a strong performance in industrial output, which was boosted by the
rise in international prices for base metals.

An increase in remittance payments from Armenians working abroad has
also been a contributing factor to the economic recovery. The recovery
progressively accelerated during this period, with the year-on-year
rate of economic growth standing at 2.4% in January and 3.1% in
January-February. These indicators led the government in late March
to revise its full-year growth forecast for 2010 from 1.2% to 1.8%.

Nonetheless, government officials stated that growth could exceed
their expectations.

With real GDP declining by 14.4% year on year in 2009, Armenia was
among the countries hardest hit by the global recession. The recession
reflected the increasing vulnerability of the Armenian economy, which
had grown overly dependent on construction, workers’ remittances
and higher global metal prices. In early April the president,
Serzh Sargsyan, said that the economy was currently in a recovery
phase. The finance minister, Tigran Davtian, expects the recovery to
be sluggish at least until the second half of 2011. In late February
the head of the World Bank office in the Armenian capital, Yerevan,
Aristomene Varoudakis, likewise cautioned that only the acute phase
of the crisis is over and that the economy would probably remain
weak for a prolonged period. The World Bank forecasts that real GDP
in Armenia will expand by 2% in 2010.

The jewellery sector is also showing signs of a revival, particularly
the diamond-processing industry. NSS data show that local firms
produced 14,775 carats of gem diamonds in the first quarter of 2010,
up by 55.3% year on year. According to the Ministry of Economy, 60,000
carats of rough diamonds were imported in January-February 2010,
six times more than during the year-earlier period, and close to the
70,600 carats imported in the whole of 2009.

Industrial output was weighed down by a contraction of almost 10%
year on year in energy production in the first quarter. Natural gas
consumption, which accounted for just over one-fifth of the total,
fell by 15.6% year on year. An unusually warm winter and decreased
purchasing power of the population appear to have been the main factors
behind the drop. The energy sector’s performance in 2010 will also be
affected by a 37.5% rise in the price of natural gas for households
that took effect on April 1st.

In the first quarter growth was also supported by the apparent end to
the sharp decline in construction-which had been a main driving force
behind the country’s pre-crisis robust growth. The sector’s output in
the first quarter was essentially flat compared with the year-earlier
period. However, this marks a significant improvement compared with
2009 as a whole, when construction contracted by 36.4%. Signalling
the potential for a further rebound in the sector later in the year,
production of construction materials soared by more than one-half,
to Dram8.3bn, in the first quarter, according to the NSS.

From: Emil Lazarian | Ararat NewsPress