Why did economic activity slow down?
Armenia’s economic activity index (EAI) in January-April 2017 compared with the same period of the previous year comprised 105.7%. Note, in January-March EAI rate was higher—6.6%.
Decrease of growth rate is conditioned by April’s index. This April compared with previous year’s April economic activity grew by 3.7%. Meanwhile in March, compared with previous year’s March, activity growth comprised 6.8%.
It should be noted that in January-April 2016 compared with the same period of the previous year, growth temp was the same—5.7%. In January-May 2016 the index remained the same, then started to decrease.
What’s the reason of economic activity slowdown this year?
Let’s start from industry. Volume of industrial production in January-April 2017 compared with the previous year’s same period, has grown by 12.9%. However, in January-March growth temp was higher—16.1%. On monthly basis the snapshot is more clear: in March 2017 compared with March 2016 industry grew by 17.2%, and in April that index reduced to 4.3%.
There is growth in industry, however, that temp is weaker, which had an effect on general economic activity growth as well.
Decline deepens in agriculture. In January-March 2017 compared with the same period of the previous year, volume of agricultural production reduced by 1.5%, and in January-April decline deepened up to 2.9%. On monthly basis the dynamics isn’t encouraging either. In March 2017 compared with March 2016 volume of agricultural production reduced by 3.7%, and April, compared with previous year’s April—by 5%.
Decline in the field of construction (double digit decline) didn’t stop. Construction volume this January-April comprised AMD 52.9 billion, which is less by 13.4% compared with the previous year’s same period. It should be noted that in the first quarter decline in construction was almost the same—13.7%, i.e. declining index has weakened by 0.3 pp, however, it isn’t enough to have a considerable effect on economic activity.
Positive dynamics is observed only in the field of services. This January-April volume of services comprised AMD 409 billion, which exceeds previous year’s rate by 10.1%. On the basis of January-March growth in the field of service comprised 10%, i.e. growth in the field accelerated by 0.1 pp.
Summing up this year’s rates, conclusion may be drawn that weakening of economic activity from 6.6% to 5.7% is conditioned by deepening of agriculture decline and mostly by slowdown of industrial growth.
It should be added that retail trade turnover volume in January-April 2017 has grown by 12.1% compared with the previous year’s same index, thus, comprising, AMD 685.9 billion (in January-March growth temp comprised 11.3%).
As for external trade, slowdown of growth rate is observed here as well. In January-April of ongoing year volume of Armenia’s external trade turnover has grown by 15.1% compared with the previous year’s same period, thus, comprising USD 1 billion 689 million (growth temp in January-March was higher—17.4%).
It’s noteworthy that export’s progressive growth towards import has been restored. Thus, if based on January-March results export has grown by 16.1%, and import by 17.9%, then in January-April export growth comprised 16.1%, and import growth—14.6%.
In the period of the first 4 months of 2017 production amounting USD 608.4 million was exported from Armenia, and production amounting USD 1080.6 million was imported to Armenia. External trade balance is negative by USD 472.2 million.
By Babken Tunyan
