The latest data from the country’s Central Bank show that the total amount of incoming cash transfers processed by local commercial banks rose by almost 25 percent to $326.7 million in the first quarter of 2011.
Non-commercial remittances, which mainly finance household expenditures, accounted fore more than three-quarters of that sum. They were up by 23.5 percent from the first quarter of last year.
The multimillion-dollar remittances have long been a major source of income for a considerable part of Armenia’s population. A rapid rise in their volume contributed to a double-digit growth of the Armenian economy, which came to an end with the outbreak of the global recession in late 2008.
Economic growth in the country resumed in 2010 amid an almost 14 percent rise in remittances. According to the Central Bank, they totaled $1.3 billion, equivalent to over 13 percent of Gross Domestic Product.
The sharper remittance increase bodes well for faster GDP growth projected by the Armenian authorities. They expect the domestic economy to expand by 4.6 percent in 2011. The International Monetary Fund and other lending institutions have made similar growth forecasts.
Armenia’s National Statistical Service (NSS) has not yet released GDP growth figures for the first quarter of 2011.
Russia -- Construction site in Maly Kozikhinsky pereulok at Patriarchs Ponds in Moscow, 25Oct2010
Nearly two-thirds of the total first-quarter remittances came from Russia, which is home to hundreds of thousands of Armenian migrant workers. The United States, which also has a sizable Armenian immigrant population, was the second largest source of the cash inflows with a more than 8 percent share in the total.
The rising remittances did not prevent a depreciation of the national currency, the dram, this year. The dram lost 3.2 percent and 13 percent of its nominal value against the U.S. dollar and the euro respectively since December. It steadily strengthened in the course of 2010.
In a December report, the IMF estimated that the Armenian currency is overvalued by 10-12 percent. The fund also said the authorities in Yerevan had a hand in its 2010 appreciation.
Meeting with senior government officials earlier this year, President Serzh Sarkisian acknowledged that the strong dram has hurt Armenian manufacturers and said it will slowly weaken in the coming months.