By Shakeh Avoyan
Rising international energy and food prices, coupled with stagnant exports and industrial output, are putting continued economic growth in Armenia at risk, according to the World Bank.
Official statistics show the Armenian economy expanding by 9.8 percent in the first five months of this year, down from the average growth rate of more than 13 percent registered in the previous six years. Construction and services remained the driving forces of the growth.
By contrast, the country’s industrial output fell by 0.4 percent during the same period. The National Statistical Service (NSS) also posted an almost zero growth in Armenian exports that contrasted with a 40 percent surge in imports. Import expenditure was clearly pushed up increased international prices of fuel, wheat and other basic foodstuffs.
In a report released on Wednesday, the World Bank said the global price trends and the uneven character of economic growth have heightened “macroeconomic risks” facing Armenia. “The most serious of those risks is increased inflation,” said Aghasi Mkrtchian, one of the authors of the report.
Mkrtchian also expressed concern about the country’s worsening trade and current-account deficits. “For the third consecutive year exports are decreasing in real terms,” he said.
“The growth outlook for the balance of 2008 and the medium term would depend on the external environment, and, most importantly, on the success of reforms in governance launched by the new Government,” concluded the World Bank Report. “The ability of Armenia’s economy to adapt to higher energy prices, especially natural gas price, would be another important factor shaping medium-term economic developments.”
On the positive side Mkrtchian noted a 35 percent increase in the Armenian government’s tax revenues registered in the first half of this year. He said the improved tax collection will allow for more public spending on social programs.
The government has already raised its projected budgetary expenditures for 2008 by 13.5 billion drams ($44.4 million).
According to Aristomene Varoudakis, head of the World Bank office in Yerevan, the bank is ready to reward Armenia’s “very successful” economic performance with more loans. He said it is now discussing with Armenian officials a new four-year lending program that could be finalized in October.