CBA Forecasts 10%-13% Economic Growth In Armenia For 2008


July 14

The protocol on the forecasts and monetary policy of the Central
Bank of Armenia (CBA) for the 3rd quarter of 2008 says that the CBA
revised some of its sectoral forecasts for the 3rd and 4th quarters
of 2008, which brought about essential changes in the forecasts for
economic growth.

The CBA Board forecasts 10-13 per cent economic growth for the
3rd and 4th quarters, and 8-11 per cent growth for the 1st half of
2009. Such fields and services and construction will exert the most
serious influence on the economic growth in the country.

The CBA attributes the 16-17 per cent growth in the construction
sector forecast in the latter half of 2008 to the expected investments
in the transport, communication, energy, metallurgy and chemical
industry. High rates of growth in the construction sector are forecast
for the 1st quarter of 2009. Specifically, 12-14 per cent growth is
forecast for the 1st quarter of 2009.

By the CBA’s preliminary estimates, 17.9% real growth was recorded
in the construction sector in the first half of 2007. The growth was
mainly ensured due to larger-scale housing construction, as well as
due to the processing industry, transport and communication sectors.

As regards the industrial sector, the CBA scaled down its forecasts
by about 2%. As a result, the forecast value added growth is four to
six20 percent. The reason why the forecasts were scaled down is some
technical problems in the extractive and metal-working industries
during January-April 2008. The problems were to have been resolved
in the 2nd quarter.

Another reason is that the investments in the chemical industry
postponed to the 4th quarter of 2008.

The CBA Board believes that the forecast increase in industrial
output will mainly be due to increased output of building materials,
hard and soft drinks, tinned food. The CBA forecasts a 5-7 per cent
increase in industrial output in the 1st half of 2009.

By preliminary estimates, the real value added growth of industrial
output was 2.7% in the 1st half of 2008. The growth was mainly due
to high rates of increase in the output of alcoholic beverages,
building materials, as well as due to the recently recorded uptrend
in energy output.

As regards the services sector, the CBA also scaled down its forecasts,
the reason being lower rates of increase in wholesale and retail
trade since the beginning of the year. As a result, the real value
added growth in the services sector was is expected to reach 10-12
per cent in 2008. A rate of increase of 11.5%-13% in the services
sector is forecast for the first half of 2009. The rate of increase
in the services sector is estimated at 10.7% for January-June 2008.

The CBA’s protocol also says that the real value added growth is to ma
ke 3-5 per cent in Armenia’s agricultural sector. In the first half
of 2008, the added value increased by 4.6% due to bumper harvest of
fruit and grapes.

According to the XCBA, the aggregate supply trends formed in the
first quarter were also recorded in the second quarter. As a result,
the real economic growth remained within 12%. In January-May 2008,
9.8% economic growth was recorded in Armenia, which is lower than
forecast by the CBA.