Armenia: Economy

Economic growth in Armenia slowed to 2.6% in the first half of 2014 from 3.5% in the same period of 2013. An 0.8% drop in industry and growth at only 0.7% in construction and 1.9% in agriculture contributed to the slowdown; services grew by 3.7%. Acceleration over the whole of 2014 is expected to come on the supply side mainly from faster growth in services, and on the demand side mainly from a recovery in private consumption supported by public sector wage hikes. Considering current trends and the effects of the slowdown in the Russian Federation, growth projections are trimmed by 0.8 percentage points for 2014 and half as much for 2015.

Selected Economic Indicators (%) - Armenia 2014 2015
ADO 2014 Update ADO 2014 Update
GDP Growth 4.6 3.8 5.0 4.6
Inflation 4.5 4.5 4.0 4.0
Current Account Balance (share of GDP) -8.7 -8.7 -8.0 -8.0

Source: ADB estimates.

Inflation eased in the first half of 2014 to an annual rate of 4.0%, down from an average of 5.8% in the full year 2013, as the remaining effects of electricity and gas price hikes in July 2013 were fully absorbed. The 12-month inflation rate declined further to 1.8% in June from 5.6% in December 2013, well below the central bank’s target band of 2.5%-5.5%. Nevertheless, inflation forecasts are retained for both 2014 and 2015, as expansionary fiscal policy, the easing of monetary conditions, and a 10% electricity price increase in August 2014 are expected to exacerbate inflationary pressures during the second half of 2014.

The current account deficit narrowed markedly to 8.0% of gross domestic product in 2013 from 11.1% in 2012, reflecting improvements in all components. However, slower economic growth in the Russian Federation - Armenia’s largest trading partner and main source of remittances - has weakened the outlook for the external sector. The forecast deficits in the current account, unchanged for the next 2 years, show no further improvement.

Source: ADB. 2014. Asian Development Outlook 2014 Update. Manila.