Global Insight
January 3, 2008

Armenian Consumer, Business Confidence Weaken in Q4 2007

by Venla Sipila

The quarterly confidence survey published by the Central Bank of
Armenia (CBA) shows that sentiment among Armenian consumers and
businesses continued to weaken over the fourth quarter of 2007, after
slipping over the previous quarters. According to ARKA News, the
composite index of consumer confidence fell to 48.6 after standing at
52.7 in the third quarter. In the fourth quarter of the previous
year, the index had stood at 50.3. Thus, the last quarter of 2007 saw
the index fall below the 50-point mark, indicating that expectations
have turned negative. Further, it was reported that the economic
activity index registered 54.4, falling markedly from the third
quarter reading of 69.2.

Significance:The decrease of the consumer confidence index below 50
points is significant as this is the critical value separating a
negative from a positive outlook. Economic activity in Armenia is set
to weaken, after 2007 looks certain to prove the sixth consecutive
year of annual growth at double-digit rates (seeArmenia: 14 December
2007: ). Looking further, growth at such high rates is unsustainable.
Extremely rapid economic expansion also brings with it concerns
regarding overheating. Indeed, the International Monetary Fund (IMF)
has cautioned that it is imperative for Armenia to ensure that
macro-economic policy is consistent with keeping inflation under