Growth of Armenia’s economy accelerated to 7.5% in the first quarter of 2013 from 5.4% in the same period in 2012 and to 7.2% for 2012 as a whole. The acceleration resulted mainly from growth in services at 9.2%, industry at 3.4%, and agriculture at 2.4%, which offset a decline in construction. On the demand side, private and public consumption and net exports were the main contributors, while investment shrank. Despite the strong first quarter performance, full-year growth forecasts remain unchanged from Asian Development Outlook (ADO) 2013 at 4.5% for 2013 and 4.6% for 2014. Besides the expected slowdown in the euro area and the Russian Federation, steep price increases for electricity (27%) and imported gas (18%) in July 2013 will likely slow growth later in the year.
|Selected Economic Indicators (%) - Armenia||2013||2014|
|ADO 2013||Update||ADO 2013||Update|
|Current Account Balance (share of GDP)||-9.8||-10.4||-9.1||-9.6|
Source: Asian Development Outlook (ADO) 2013 Update; ADB estimates.
These factors, coupled with severe hailstorms that struck several provinces in May 2013, helped drive inflation to 8.5% year on year in July 2013 and annualized inflation during January-July 2013 to 4.7%. Inflationary pressures will likely persist for the rest of the year and in the first half of 2014 as the July 2013 rise in utility prices is passed through. Inflation forecasts have thus been raised from 3.6% to 5.0% for 2013 and from 3.2% to 4.5% for 2014.
Revised data now show that the current account deficit widened to 11.2% of gross domestic product (GDP) in 2012 from 10.9% a year earlier, as the trade deficit grew to 24.8% of GDP in 2012 from 23.6% in 2011. As only small improvements in the current account are projected, the current account deficit forecast has been raised to 10.4% of GDP in 2013 and to 9.6% in 2014, from 9.8% in 2013 and 9.1% in 2014 in ADO 2013. While higher-than-expected fuel prices could widen the deficit further, increased remittances and higher earnings from exports of goods and services are expected to offset the impact of any further rise in fuel prices.
Source: ADB. 2013. Asian Development Outlook 2013 Update. Manila.