World Bank: GDP growth in Armenia remains strong

GDP growth in Armenia remains strong, fueled by private consumption, the World Bank says in a monthly economic update for December 2019.

Inflation has been slowly edging upwards, while  strong growth in imports of vehicles and lower gold exports widened the trade deficit.

The Budget recorded a 0.5 percent of GDP deficit in October but remains in surplus year-to-date. The poverty rate fell from 25.7 percent in 2017 to 23.5 percent in 2018.

Below are some key findings presented by the World Bank:

GDP grew by a strong 7.9 percent year-on-year (yoy) in the third quarter of 2019. This brings the cumulative GDP growth in 2019 through September to 7.5 percent yoy, driven largely by private consumption. Importantly, net export and capital formation, which stagnated at the start of the year, had positive, albeit modest, contributions to growth (0.7 percentage points (pp), each), which helped compensate for the decline in public consumption, the World Bank said.

On the production side, most of growth (5.5 pp) came from trade and services and the rest from industry (mainly manufacturing (1 pp), mining (0.6 pp) and construction (0.3 pp)). These trends continued in October with the Economic Activity Index increasing by 7.7 percent, yoy.

Inflation in November continued to edge upwards. Consumer prices increased by 1 percent in November yoy, up from 0.9 percent annual inflation in the previous month, but still below the lower bound of the target range of the Central Bank of Armenia (CBA) of 4 +/-1.5 percent.

With imports growing strongly and exports moderating, the trade deficit widened. After growing by 33 percent yoy in September, exports in October grew by only 1.3 percent yoy.

The appreciating pressures on the dram dissipated. The wider trade deficit was partly offset by stronger transfers from abroad, tourism proceeds as well as unrecorded re-exports lowered the financing needs.

The Budget registered a 0.5 percent of annual GDP deficit in October. With this, the surplus in the year-to-October declined to 0.9 percent of GDP; still a considerable overperformance compared to the annual budget deficit plan of 2 percent of GDP.

The poverty rate declined to 23.5 percent in 2018 from 25.7 percent in 20171. The reduction was more pronounced in rural areas and Yerevan, while in secondary cities the poverty rate increased.

Credit and deposits grew by above 15 percent yoy in October, with deposits growth slightly outpacing credit expansion. Both, the loan and the deposit portfolios grew as a result of the local currency component, thus helping to reduce the dollarization rate.

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