2013年-世界发展银行全球_Armenia_Economic_Report_October_2013___Stronger_Structural_Reforms_Needed_to_Offset_Macroeconomic_Risks_32页_946kb

Armenia Economic Report Summary (October 2013)

Core Content

This report provides an analysis of Armenia's economic performance and policy developments in 2013, highlighting the need for stronger structural reforms to offset macroeconomic risks. It outlines recent political and economic trends, fiscal and monetary policies, and structural reforms aimed at improving competitiveness and growth.

Main Economic Developments

GDP Growth and Domestic Demand

• GDP growth slowed significantly in the second quarter of 2013 to 0.6% (year-on-year), down from 7.5% in the first quarter and 7.2% for the whole of 2012.
• The decline in construction activity was a major factor in the slowdown.
• Agriculture, mining, and services showed robust growth.
• Manufacturing expanded by 3.2% (year-on-year) but became less productive, with output growth at 10.2%.
• Private consumption outpaced investment, driven by high consumer lending and remittances.

Inflation

• Inflation accelerated to 8.5% in July 2013, exceeding the CBA's target band (2.5–5.5%).
• The rise was mainly due to utility tariff increases and food price hikes.
• Core inflation remained low, suggesting that second-round effects had not yet materialized.
• Energy costs had a significant impact on inflation, with fuel and taxi fares increasing by 6.2% and 1.3%, respectively.

External Accounts

• The current account deficit (CAD) improved by 6 percentage points of GDP to US$554 million in the first half of 2013.
• Exports increased by 7.7%, and remittances rose by 14.9%, helping to reduce the CAD.
• FDI inflows remained depressed, with only US$58 million in the first quarter, the lowest since 2009.
• External debt rose by 1.9%, driven by private sector borrowing.
• Armenia issued a $700 million Eurobond to diversify funding sources, with strong investor demand.

Structural and Policy Developments

Fiscal Policy

• Fiscal policy was tighter in 2013 due to under-spending in the capital budget, mainly caused by delays in the North-South corridor project.
• Tax revenues exceeded targets by 21.1%, partly due to the taxation of military personnel and revised royalty regimes.
• Tax administration reforms improved compliance, with nearly half of tax returns filed electronically and 95% of invoices sent electronically.
• Revenue collection was bolstered by eliminating tax exemptions, which could increase tax revenue from 1.1% to 1.4% of GDP.
• Government spending shifted from capital to social spending, with capital spending accounting for only 8% of total spending in the first half of 2013.
• Fiscal deficit is expected to widen by 3 billion AMD, fully financed by domestic borrowing.

Monetary and Exchange Rate Policies

• The policy rate was increased to anchor inflationary expectations.
• Credit to the private sector expanded, but non-performing loans also increased.

Structural Reforms

• The Armenia Development Strategy (ADS) emphasizes the need for productivity-enhancing reforms and a new growth model.
• To achieve 6–8% annual growth, the government must improve the business environment, enhance competition, and connect Armenia more closely to global markets.
• Key areas for reform include:
  • Business climate and public administration improvements.
  • Financial intermediation to increase investment.
  • Utilization of the Armenian diaspora for labor force expansion.
  • Enhancing competitiveness through market reforms.
• The government's medium-term reform agenda includes:
  • Legal reforms to align with the Eurasian Customs Union (ECU).
  • Preparation of negotiation proposals on import duties.
  • Review of WTO obligations and relevant legislation.

Outlook and Risks

Economic Outlook

• Economic growth is expected to be around 4–5% in the medium term due to sluggish growth in main trading partners.
• The Armenia Development Strategy aims for 6–8% growth, which requires accelerating structural reforms.
• Export performance remains resilient, with metal and processed food exports driving the trade balance.

Risks

• Inflation remains a risk due to energy price increases and food inflation.
• FDI inflows are low, limiting long-term growth potential.
• Poverty is expected to increase due to utility tariff hikes and rising food prices.
• The poverty rate may rise by 2.8 percentage points as a result of these pressures.
• Low wages in the private sector and gender disparities in the labor market continue to be challenges.

Key Challenges

• Gender inequality in the labor market persists, with a 25–30% wage gap and lower job placement rates for women.
• Private sector wage growth is volatile, while public sector wages reflect only ordinary increases.
• Minimum wage policy has mixed effects on poverty, with potential negative impacts on employment if set too high.
• Energy costs and utility prices have a significant impact on low-income households.
• FDI remains depressed, and foreign borrowing is limited due to concessional lending restrictions.

Conclusion

Armenia faces challenges in sustaining growth and reducing poverty, driven by sluggish economic activity, inflationary pressures, and structural inefficiencies. While external accounts have improved and fiscal policy has been more disciplined, the government must accelerate structural reforms to enhance productivity, competition, and access to global markets. Improving the business environment and tax administration are critical for long-term growth and reducing inequality.