Strong Annual Growth Of Armenian Economic Activity Persists Througho

STRONG ANNUAL GROWTH OF ARMENIAN ECONOMIC ACTIVITY PERSISTS THROUGHOUT Q1
Venla Sipila

Global Insight
May 2, 2012

The latest monthly indicator of economic activity published by
the Armenian National Statistical Office suggests growth of 6.6%
year-on-year (y/y) in March. Following gains of 6.7% y/y in February
and 4.8% y/y in January, this result brought the rise in this indicator
for the whole of the first quarter to 6.1% y/y.

Month-on-month (m/m) comparison testifies to marked strengthening
of activity during the first quarter; sharp contraction of over 50%
m/m in January turned to growth of over 5% m/m in February, to be
followed by a surge of 18.4% m/m in March.

Significance:The index of economic activity, only fairly recently
introduced in Armenia, reflects overall trends in the economy.

However, at 5.9%, its growth over last year somewhat exceeded the
official rate of GDP growth which was reported at 4.6%. In any case,
the economy seems to have started this year on a fairly strong note,
as the industrial sector, in particular, has performed well. To an
important degree, this has been the result of strong mining-sector
gains, supported by high metal prices. However, growth is likely
to weaken over the next quarters. This muted outlook is based on
expected moderation in industrial gains, while also the construction
sector is performing fairly weakly at the moment. However, assuming a
good agricultural harvest, and fairly well performing domestic trade
sector, economic growth of some 3-3.5% should be achievable for this
year as a whole. However, risks arise from the uncertainty of the
external environment, given that the economy remains very dependent
on remittance and investment inflows.