Armenia’s economic recession eased further last month, resulting a full-year Gross Domestic Production fall of 14.4 percent, according to official statistics released on Monday.
The rate of economic contraction reported by the National Statistical Service (NSS) is significantly down from the peak decline of 18.5 percent registered during the first seven months of 2009. It essentially matches government forecasts made in recent months.
The country’s macroeconomic performance began slowly improving in September, with GDP decreasing by 16 percent year on year in January-November. This has been due, in large measure, to the fact that the Armenian economy was already adversely affected by the global financial crisis in the fourth quarter of 2008 after nine months of double-digit expansion.
The Armenian government says economic growth will get back into positive territory but will make up a modest 1.2 percent this year. The International Monetary Fund and the World Bank have made similar forecasts. According to IMF projections, Armenian growth will accelerate to 3 percent in 2011 and gradually reach 4.5 percent in 2014. The Armenian economy expanded by an average of 12 percent from 2002 through 2007.
The GDP fall in 2009 was primarily attributable to a nearly 37 percent slump in construction registered by the NSS. The once booming construction sector, which accounted for about one fifth of GDP, has been hit hardest by the recession and the resulting reduction in external cash inflows to Armenia.
A more than 8 percent fall in industrial output also significantly contributed to the decline. By contrast, the NSS recorded a 1 percent increase in retail trade and other services. Armenia’s agricultural output, another major source of GDP, was flat in 2009 mainly because of the decreased production of meat and dairy products.
Despite the recession, the Armenian authorities have failed to keep inflation below a maximum target rate of 5.5 percent. Consumer prices in the country rose by 2 percent in December alone, pushing up the annual inflation rate to 6.5 percent.
The Central Bank of Armenia (CBA) considers the rising inflationary pressures to be a further indication of unfolding economic recovery. The CBA raised its benchmark re-financing rate by 50 basis points to 5.5 percent on Friday, citing the need to prevent further price hikes. The bank steadily cut the cost of borrowing in 2009.