By Mark Dovich
Armenia’s gross domestic product, a broad measure of goods and services produced, expanded by 9.2% in the first three months of the year, according to the latest figures out this week from Armenia’s state statistical agency.
Much of the growth last quarter was driven by booms in manufacturing and processing, wholesale and retail trade, financial and insurance activities, and construction, which all expanded by double-digit figures year-on-year.
That was tempered by declines in public administration and defense spending, mining, transport and logistics, and information technology and telecommunications.
Economic activity index misses the mark
The 9.2% figure has come as a bit of a surprise, since it is significantly lower than Armenia’s economic activity index, a measure calculated by the government that is meant to closely approximate GDP growth. Armenia’s economic activity index increased by 14.3% last quarter.
Economist Armen Ktoyan told CivilNet the large gap is likely due to Armenia’s re-export of Russian gold to international markets, a trade that has surged in recent months and would be reflected in the economic activity index, but not in GDP.
“The economic activity index shows the economy’s physical size and growth, while GDP reflects the value added. The processing industry, in this case, goldsmithing, is growing dramatically due to re-exports, which is reflected in the economic activity index. However, that sector does not contribute much added value, and therefore, GDP is more modest,” Ktoyan explained.
What’s the broader economic context?
The latest figures show Armenia’s economy is continuing to expand substantially, even after growing by 8.7% last year and 12.6% the year prior, marking two consecutive years as the fastest growing economy in the region.
That has largely been fueled by massive inflows of capital and labor from Russia and soaring trade between the two countries, including a vibrant re-export business. Armenia’s trade topped $20 billion for the first time last year, including more than $7 billion in trade with Russia, the world’s most sanctioned country.
Armenia’s government is forecasting 7% growth for 2024.
With additional reporting by Arshaluys Mghdesyan
