By Emil Danielyan
Construction has surpassed industry as the single largest sector of the Armenian economy after years of building boom that has been a key driving force behind the country’s double-digit economic growth.
According to the latest macroeconomic data released by the National Statistical Service (NSS) on Friday, the total monetary value of construction work carried out in Armenia in the first nine months of this year amounted to 604.3 billion drams ($2 billion), equivalent to 23.2 percent of Gross Domestic Product.
Armenia’s industrial output accounted for just under 22 percent of GDP in the same period, down from its dominant share of 23.2 percent reported by the NSS in 2007. The manufacturing sector has been largely stagnant in recent years in sharp contrast to an overall economic growth that has averaged 13 percent per annum since 2001.
The NSS data show the Armenian economy expanding by 10.4 percent in January-September 2008 on the back of its booming construction and services sectors. The construction boom, largely concentrated in the center of Yerevan, has in turn been fuelled by skyrocketing real estate prices and growing demand in expensive housing and office space.
There are growing signs that that boom may be coming to an end, with housing prices stabilizing and, according to some realtors, even falling in the last few months. According to the official statistics, growth in construction slowed from almost 20 percent in 2007 to 12 percent in January-September 2008. GDP growth remained in double digits thanks to a pickup in industrial output recorded by the NSS in the third quarter of this year.
Well-to-do Armenians living abroad, notably in Russia, are believed to have been key buyers of luxury apartments built in Yerevan. The global financial crisis is calling into question continued large-scale cash inflows from them as well as migrant workers supporting their relatives in Armenia. The Armenian Central Bank says those remittances continued to rise strongly in the third quarter.