Hrant Mikaelian - State of the Armenian Economy in the First Half of 2024 | Ep 350, Aug 3, 2024 [EP350]

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Guest:

• Hrant Mikaelian

Topics:

• Economy in the First Half of 2024
• State Revenues & Spending
• Finance Sector
• Looking Ahead

Episode 350 | Recorded: August 1, 2024

Show Notes

State of the Armenian Economy in the First Half of 2024

Economic Stats

A week ago the Luys Foundation put out its analysis of the Armenian economy for H1 2024, that’s the first half of this year. So our discussion is about stats that are for January through June 2024.

They note that the Armenian economy is slowing down from the first quarter of the year to the second.

Similarly, they point out that the import and export sectors have also slowed down, and if we ignore the import and re-export of gold, an item which is turned into Jewelry in Armenia and re-exported, then there is an actual drop in the export and import sectors.

Questions:

• What are your observations on the condition of the economy, and how do you explain the current trends?
• We hear a lot about the booming Armenian export sector. What’s the significance of the precious stones and metals and jewelry sector? Is this a large industry, with a significant labor force? Does it contribute to a large workforce and their well being, or is it mostly a monopoly benefiting a few?

State Revenues

The report says that although tax revenues are up 5.2% year over year since 2023, they are falling 9.1% short of projections. Meanwhile VAT and excise revenues were down 5.2 and 9.7%, depressing overall revenues.

Question:

• Should we worry about the shortfall, or were the projected revenues too rosy?

Government Spending

Government spending is up 17.4%, but is also short of projections, mostly because less has been spent on the operational side, but overspent on the capital side. The report attributes capital spending increases to defense spending. (Frankly I’d love to know more, because I’ll believe it when I see it).

Meanwhile Armenia’s national debt just went over $12B, up almost 10% since last year. It’s right around 50% of GDP.

Questions:

• With every projection off a little bit, it seems like things are happening to Armenia, rather than the other way around, with Armenia controlling its economic outlook. Plus, there’s a constant reliance on more debt. How worried should we be about this lack of control?
• Is there a remedy to reliance on external debt?

Finance Sector

On the financial side, it looks like inflation is mostly under control in Armenia, despite a minor uptick in the last couple of months. Two days ago the Central Bank of Armenia (CBA) reduced the refi rate by another quarter; today it stands at 7.75%.

Questions:

• What are your thoughts about the current state of monetary policy?
  • Was the reduction a response to the slowing economy?
• The Dram rate has been reasonably stable, maybe a little strong, over the past year. What are the reasons for it, and how is it affecting the Armenian economy?
• Consumer and mortgage loans are up almost 20% over 2023. What do you attribute this to, and is this a good thing?
  • Are peoples’ wages keeping up with their debts?

Looking ahead

Questions:

• If people want to follow how the Armenian economy is doing and where it’s going, what resources are available to them?
• What key economic leading indicators are available for Armenia?
• What are they showing about where this economy is going towards the end of the year?

Wrap-up

That’s our show, we hope you found it useful. Please find us on Social Media and follow us everywhere you get your Armenian news.

Thanks to Laura Osborn for the music on our podcasts. We’ll talk to you soon!

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