Monthly Macroeconomic Indicators – July 2018

Key Macroeconomic Indicators 

• July 2018 Year-on-Year Economic Activity Index: +11.1%
• Jan-July 2018 Year-on Year Economy Activity Index: +9.3%
• July 2018 Year-on-Year Exports: +0.3%
• Jan-July 2018 Year-on Year Exports: +17..3%
• July 2018 Year-on-Year Imports: +22.4%
• Jan-July 2018 Year-on Year Imports: +32.1%
• July 2018 Year-on Year Average Monthly Wages: +3.0%
• Jan-July 2018 Year-on Year Average Monthly Wages: +4.0%
• July 2018 Year-on Year Consumer Price Index: +2.3%
• Jan-July 2018 Year-on Year Consumer Price Index: +2.4%

Analysis 

The year-on-year economic activity growth for July was registered at +11.3%, rising from +9.6% in June and and continuing the roughly ten percent growth rate averaged since November 2017.

Overall, the growth rate in the first seven months of the year averaged a highly impressive +9.3%, driven by a +18.7% growth in services, a +10.4% growth in construction, a +8.9% growth in trade, a +4.6% growth in agriculture, and a +4.3% growth in industrial output. Over the first seven months of the year all five categories of the economy have registered positive growth.

The surge in growth rate in July was primarily driven by services, which registered a +21.8% monthly year-on-year growth rate.

In the first seven months of the year, wages were up +4.0%, while consumer prices continued to creep up and reached +2.4%. The two indicators combined together are likely to make the highly impressive growth rate seem less significant to the average citizen, which is significant given what is likely to be a highly competitive early parliamentary election in spring of 2019.

Exports for July registered a +0.3% year-on-year growth, while over the first seven months that figure stood at +17.3%. Exports averaged a +34.4% growth rate over the first quarter, before slowing down in the second quarter, and continuing the slide into the third quarter.

The continued fall in exports is heavily influenced by the drop in value of copper, by far Armenia’s largest and most important export. After hitting a four-year high in June, prices have been falling for the past nine weeks. The price is now at a one-year low.

In 2017, overall exports equaled 2.243 billion USD, surpassing the two billion dollar mark for the first time since independence. Exports per GDP stood at 19% at the end of 2017, a marked improvement over a decade before, when the same figure stood at 9%.

Over the first six months, the trade deficit stood at -100%, which is a regression from the -86% recorded for 2017. The further widening of the trade deficit is putting Armenia off track from the previous government’s goal to close the trade deficit by 2022.

Russia continues to remain Armenia’s largest trade partner, with a surge in Armenian exports to Russia since Armenia’s accession to the Eurasian Economic Union (EEU).

The improving macroeconomic situation in Russia is the most significant factor in the impressive economic growth rate in Armenia.

Imports and domestic consumption overall were boosted partially due to rising remittances from Russia, which continue to increase for the second year in a row following three years of dramatic decline due to the struggling Russian economy. They stood at +8.7% year-on-year in the first quarter relative to the year before.

Fitch, in its latest update released on June 18th, projects a 4.7% growth rate for Armenia in 2018, while the World Bank, in its update which was released on June 6th, projects a 4.1% growth rate. Those projections are likely to be revised upward, given the latest economic numbers.