EURASIAN DEVELOPMENT BANK: DECELERATION OF GROWTH AGAINST THE BACKGROUND OF HIGH INFLATION AND EXTERNAL DEBT

arminfo
July 26, 17:04

Eurasian Development Bank has prepared Macromonitor of the CIS
countries, in which it assessed and predicted their macroeconomic
development.

According to the monitor, the GDP in the CIS countries may grow by
4,5% in 2011 and by 4,53% in 2012. The economy of the Central Asia
occupies the leading positions - Turkmenistan (9,3%), Uzbekistan
(7,8%), Tajikistan (6,1%), Kazakhstan (5,9%) and Kyrgyzia (5,7%).

The economy of Russia and Ukraine will grow by 4,5%, Armenia - 4,3%,
Moldova - 4,1% and Azerbaijan - 3,9%.

The indicator of the economic activeness in Armenia in March 2011
versus March 2010 amounted to 0.3%. The economic production grew by
5.9%, including in the mining branch - by 2.3%, in processing - 3.8%.

Trade grew by 5%. Slowdown was noticed in the rest branches of
economy. The service sphere, which has a big share in the GDP,
reduced by 7,3%. The construction volume also decreased by 5,2%.

The unprecedented slowdown in the sphere of agriculture fixed in
2010 (13.5%), continued this year as well. The volume of agriculture
production reduced by 2% in the 1Q 2011.

The consumption has again become the driver of growth. Import of
goods grew by 6,8%, the biggest share of which were mineral products
(21.2%)as well as motors and equipment (12.9%).

As against the 1Q 2010, the state budget revenues grew by 9%, 94.9% of
which at the expense of the tax revenues, state taxes and payments for
obligatory social insurance, 5% - at the expense of other profits and
0.1% - of social grants. The expenses grew by 6,6% over the reported
period. So, the budget deficit was fixed at 2,4 bln drams.

The external debt of Armenia grew by 32,2% in 2010. The debt of the
government reached $2.7 bln and the debt of Central Bank - $699 mln.

In general, the aggregate debt of Armenia, including internal and
external amounted to $6.2 bln by the end of 2010. Despite high indices
of the ratio of external debt to GDP (about 67% by the end of 2010),
Armenia continues getting credits and looking for the new ones.

This will lead to further growth of external debt and to dependence
of the economy on external funds.

According to the results of 1Q 2011, the inflation level in Armenia
was the highest among the CIS countries - 11.5%. The prices for
food products grew by 17.1%. As a result of the inflation pressure,
Armenian Central Bank increased the re-financing rate by 1.25% in
2011. It is expected that high proces for food and the growth of the
state expenditure will continue making the inflation pressure over
the current year. For this reason, hardening of the monetary policy
will play a great part for supporting of stability of the local prices.

The index of the economic activeness of Armenia in April of the
current year grew by 7,7% as against April 2010. The volume
of industrial production grew by 11% in April. International
institutes of development predict the GDP growth in Armenia by
3,5%-4,6%. The acceleration of reforms directed to improvement of
business-environment, tax sphere as well as development of the local
currency, the capital markets and the export growth will promote
further growth of economy in Armenia.