ARMENIAN TRADE GAP REMAINS DEEP THOUGH OCTOBER AS IMPORTS KEEP SURGING
Venla Sipila
World Markets Research Centre
December 3, 2008
According to the latest customs-based foreign trade data from the
Armenian Statistical Service, the country’s trade deficit measured
$2US.638 billion in January-October, ARKA News reports. This
imbalance was the result of only marginal growth in exports and
soaring imports. Indeed, exports in the ten-month period gained 0.9%
year-on-year (y/y), reaching $941US.2 million, while imports rose by
42.8% y/y, totalling $3US.579 million. Notably, exports of precious
and semiprecious stones and precious metals decreased clearly,
while exports of non-precious metals also eased slightly in annual
comparison. Rapid gains were posted in several import categories,
among these a surge of some 64% in imports of equipment and tools. The
January-October data signal some strengthening of exports in October,
as the first three quarters of the year had seen exports fall by
1.8% y/y. On the other hand, coming after import growth of 38.3%
y/y reported for January-September, the latest figures also suggest
accelerating import growth.
Significance:The cumulative trade deficit for the first ten months
of the year already clearly exceeds the trade gap for last year as
a whole, which measured some $2US.1 billion, corresponding to 23% of
GDP. This year has seen Armenia’s trade gap soar as domestic demand
has persistently maintained very high growth rates, fuelling imports,
at the same time as export potential remains weak. Economic growth
should finally start to ease from double-digit rates, and this will
have a moderating impact on imports. On the other hand, the increase
in the price of gas charged by the Russian energy giant Gazprom, the
monopoly gas importer in Armenia, will increase to $154US per 1,000
cubic metres (cm) from the beginning of April 2009, up from $110US
per 1,000 cm this year, having an upward impact on import costs. The
trade deficit further continues to put pressure on the overall current
account position, which leaves Armenia vulnerable to external shocks,
as financing of the deficit is dependent on investment and transfer
inflows. On the other hand, a large part of imports relates to capital
goods, which bodes well for export potential in the future. Then again,
the gloomy global growth prospects also represses the export outlook
for Armenia.