Economic New from Armenia
10.3% ECONOMIC GROWTH RECORDED IN ARMENIA IN H1 2008
ARKA
Aug 6, 2008
YEREVAN, August 6. /ARKA/. A 10.3% economic growth was recorded in
Armenia in the first half of this year against the same period of 2007.
The RA National Statistical Service reports that the volume of Gross
Domestic Product (GDP) was 1,322,732.6mln Drams (in market prices)
in the period under review.
GDP deflator index was 108% in the period as compared with January-June
2007.
According to the statistical data, 7.7% growth of gross added value
provided a 6.9 pct increase in the actual volume of GDP (9.2pct in
January-June 2007). 29.9% growth of taxes, the subsidies exclusive,
provided 3.4pct of the actual growth of GDP (2.4pct in January-June
2007).
In the period, 16.8% construction growth raised the GDP by 3.4pct
(against 3.8pct in the first half of 2007). Industry (including energy
sector) provided 0.1pct of economic growth (0.5pct in January-June
2007).
8.3% growth of agriculture, forestry, hunting and fishing provided
0.9pct of the economic growth in the period.
22.8% growth recorded in financial sector and real estate transactions
provided 1.8% of the GDP growth (2pct in January-June 2007).
The share of added value was 86.5% in the GDP structure against 88.6%
in the first half of 2007.
The share of industrial production was 39.6% against 39.8% in January-
June 2007. The share of agriculture was 9.4% and that of construction
was 22.7% in the period. Trade, public catering, transport and
communication provided 18.6%, the services sector - 12%.
Taxes, the subsidies exclusive, constituted 13.5% of the GDP.
GDP per capita was 410,353Drams or $1,334 (871 Euros) at the end of
June this year.
11.6% economic growth was recorded in the first half of 2007.
Under the state budget, 10% growth of GDP is expected in Armenia
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
in 2008. ($1=301.03Drams).CENTRAL BANK OF ARMENIA PRESENTS YET ANOTHER MODEST INTEREST RATE RISE
by Venla Sipila
World Markets Research Centre
Global Insight
August 5, 2008
The board of the Central Bank of Armenia (CBA) has decided to lift
its official refinancing rate to 7.50%, ARMNIFO News reports. This
move presents a 25 basis point increase in the policy rate, the
seventh such move in as many months. The decision closely follows
the publication of July inflation data, which showed month-on-month
(m/m) deflation of 2.2%, but also renewed speeding up of annual price
growth to 10.7% (see Armenia: 4 August 2008: ). The CBA analysed that
the recent easing of some food prices in international markets has
not filtered though to domestic inflation while high energy prices
continue to present second-round pressure on non-food and service
prices. The Bank further indicates that the behaviour of world market
oil prices continues to signal uncertainty, even though they have
fallen modestly in the very recent developments. The CBA adds that
further revisions in the policy rate will depend on the impact of
international food prices on the domestic market.
Significance: The further increase in the interest rate was expected,
given that the Armenian inflation rate keeps running well above the
CBA's target rate of 4%. The CBA has in recent years proven fairly
competent in its monetary policy, showing ability and willingness to
remain vigilant regarding inflation control. The Armenian government
has also recently pledged wide-ranging efforts to curb rapid price
rises. However, the central bank's key means for curbing inflation in
the still relatively undeveloped financial environment has been letting
the dram appreciate considerably in response to strong remittance and
foreign investment inflows. In addition to inflation being pushed
upwards from the cost side due to high prices of food and energy,
demand-side price pressures also continually play a role, as the robust
Armenian GDP growth has proved surprisingly reluctant to cool. As
domestic demand is partly boosted by high budget spending, including
fiscal restraint would be advisable as part of inflation-controlling
efforts, as also recently urged by the International Monetary Fund
(IMF; see Armenia: 23 June 2008:).
by Venla Sipila
World Markets Research Centre
Global Insight
August 5, 2008
The board of the Central Bank of Armenia (CBA) has decided to lift
its official refinancing rate to 7.50%, ARMNIFO News reports. This
move presents a 25 basis point increase in the policy rate, the
seventh such move in as many months. The decision closely follows
the publication of July inflation data, which showed month-on-month
(m/m) deflation of 2.2%, but also renewed speeding up of annual price
growth to 10.7% (see Armenia: 4 August 2008: ). The CBA analysed that
the recent easing of some food prices in international markets has
not filtered though to domestic inflation while high energy prices
continue to present second-round pressure on non-food and service
prices. The Bank further indicates that the behaviour of world market
oil prices continues to signal uncertainty, even though they have
fallen modestly in the very recent developments. The CBA adds that
further revisions in the policy rate will depend on the impact of
international food prices on the domestic market.
Significance: The further increase in the interest rate was expected,
given that the Armenian inflation rate keeps running well above the
CBA's target rate of 4%. The CBA has in recent years proven fairly
competent in its monetary policy, showing ability and willingness to
remain vigilant regarding inflation control. The Armenian government
has also recently pledged wide-ranging efforts to curb rapid price
rises. However, the central bank's key means for curbing inflation in
the still relatively undeveloped financial environment has been letting
the dram appreciate considerably in response to strong remittance and
foreign investment inflows. In addition to inflation being pushed
upwards from the cost side due to high prices of food and energy,
demand-side price pressures also continually play a role, as the robust
Armenian GDP growth has proved surprisingly reluctant to cool. As
domestic demand is partly boosted by high budget spending, including
fiscal restraint would be advisable as part of inflation-controlling
efforts, as also recently urged by the International Monetary Fund
(IMF; see Armenia: 23 June 2008:).
Cash Transfers To Armenia Jump To New High
By Emil Danielyan
Cash remittances sent home by Armenians working abroad jumped by 57.5
percent to $668.6 million in the first half of this year, helping
Armenia to sustain robust economic growth and finance its massive trade
deficit.
The figure released to RFE/RL by the Central Bank of Armenia (CBA) on
Tuesday is equivalent to 15 percent of the country's first-half Gross
Domestic Product. It measures only the amount of remittances processed
by Armenian commercial banks. Comparable sums are believed to enter the
country through non-bank transfer systems.
The bank transfers, most of them coming from Russia and the United
States, already rose by 37 percent to a record-high level of $1.32
billion last year. The latest CBA data put them on course to set a new
record in 2008.
The multimillion-dollar remittances have been a key source of revenue
for a considerable part of Armenia's population ever since the economic
collapse of the early 1990s that forced hundreds of thousands of people
to go abroad, mainly to Russia, in search of employment. Economists
agree that they have also been a major factor behind Armenia's economic
growth, significantly boosting domestic consumer demand and the booming
construction and services sectors. According to official statistics, the
Armenian economy expanded by 10.3 percent in the first half of 2008 and
is thus on track to register a double-digit growth rate for the seventh
consecutive years.
The remittances have also been the main source of financing for the
country's widening current-account trade deficits. Official figures for
the first half show the trade imbalance skyrocketing by 66 percent to
$1.39 billion on the back of a 40 percent surge in imports. Armenian
exports, by contrast, fell by about one percent to $520 million.
The rising amounts of money sent by migrant Armenian workers to their
relatives are also thought to have been instrumental in the more than 90
percent nominal appreciation of the Armenian national currency, the
dram, against the U.S. dollar registered in the past five years. The
dram's strengthening stopped late last year, possibly due to the start
of Armenia's dramatic presidential race and the resulting political
turmoil. The process resumed in May, with the dram gaining more than 2
percent in additional value against both the dollar and the euro since
then.
Government Approves Tax Reform Plan
By Emil Danielyan
The Armenian government approved on Thursday a three-year plan of
legislative and administrative measures which Prime Minister Tigran
Sarkisian hopes will reduce endemic tax evasion and at the same time end
arbitrary actions of tax authorities.
Sarkisian has repeatedly described improved tax administration as his
chief priority, saying that it is key to fighting against government
corruption and strengthening the rule of law in Armenia.
His appointment as prime minister in early April was followed by a
government crackdown on bribery and other illegal practices within
Armenia's notoriously corrupt customs service and more rigorous
financial inspections of corporate taxpayers.
Sarkisian also formed last June a consultative council of government
officials and businesspeople dealing with the introduction of a `new
culture of tax administration.' The move was followed by the
introduction on July 1 of a new, less cumbersome, procedure for the
filing of quarterly financial reports to the State Tax Service (STS).
The program adopted by Sarkisian's cabinet commits the STS and other
government bodies to taking more such measures in the next three years.
As part of the tax reform, ministers also approved a raft of amendments
to Armenia's Customs Code and a dozen laws regulating taxation. A
government statement said they will be submitted to the National
Assembly soon.
Speaking at the weekly cabinet meeting, Sarkisian said the reform will
primarily target large companies suspected of grossly underreporting
their earnings. He said it will also result in an `environment of soft
tax administration' for small and medium-sized businesses The latter
have born the brunt of crackdowns on tax fraud announced by the
government until now, frequently accusing the STS of arbitrarily forcing
them to pay more taxes.
So far there have been no indications that Armenia's largest and most
lucrative businesses, typically owned by government-connected
individuals, have significantly boosted their contributions to the state
budget. The government's total tax revenues soared by 35 percent to 275
billion drams ($916 million) in the first half of this year. However,
much of the gain resulted from increased proceeds from valued-added tax
(VAT), suggesting that tax collection is improving largely at the
expense of ordinary consumers, rather than the rich. Corporate profit
tax generated less than 17 percent of the first-half revenues, compared
with a 51.5 percent share of VAT.
The government underlined its heavy reliance on VAT earlier this week
when it ordered the mandatory use of cash registers by thousands of
small traders selling prepared foodstuffs, clothing and other consumer
goods in retail markets across Armenia. Sarkisian again defended what
promises to be a highly controversial measure as he unveiled the tax
reform package on Thursday. `If we can't get information about the real
turnover in [retail] trade, we will fail to fight against the shadow
economy and to collect more taxes,' he said.
The Armenian premier also stressed the importance of public support for
the government's reform agenda. `We need to receive the public's support
if are to succeed in this endeavor,' he said. `It is our duty to give
the public accurate information about steps taken by us.'
Government Targets Markets In Crackdown On Tax Evasion
By Anna Saghabalian
Risking protests from thousands of small traders, Prime Minister Tigran
Sarkisian announced on Tuesday a government crackdown on marketplaces
across Armenia which he said account for much of the country's retail
trade and grossly evade taxes.
The crackdown is the latest in a series of government measures meant to
combat widespread tax evasion in the country.
Sarkisian said earlier that the abundance of retails markets, where
traders enjoy preferential forms of taxation and do not have to follow
accounting rules mandatory for other businesses, is a major source of
tax fraud. That, he said, significantly reduces proceeds from the
collection of value-added tax (VAT), the number one source of the
Armenian government's tax revenues.
The Armenian premier unveiled a government plan to address the
`extremely serious problem' at a public meeting on Tuesday with the
owners and managers of several dozen major markets that mostly sell
clothing, electronics items and other household goods. `We can not fight
against the shadow economy as long as 80 percent of retail trade in the
Republic of Armenia is not taxed,' he said.
At the heart of the plan is the mandatory purchase and use of cash
registers. Market administrations are supposed to ensure that all
traders input their sales in the devices starting from October 1 or face
heavy fines. They must sign relevant contracts with the traders by
August 15.
`Sanctions for failure to comply with these rules will be substantially
toughened,' warned Sarkisian. `This situation can not be tolerated
anymore.'
Previous Armenian governments already attempted to introduce cash
registers in the markets in the past, but eventually backed away in the
face of angry street protests by traders. Sarkisian made clear that his
cabinet would not bow to such pressure.
Some of the market chiefs attending the meeting made no secret of their
reluctance to go along with the government measure. Vagharsh Abrahamian,
who runs a jewelry market in the center of Yerevan, complained that they
were not given enough time to enforce the new rules. `But we must still
comply,' he said.
Simon Aghazarian, the manager of a similar market in the city's
Malatia-Sebastia district, said the measure will hit hard many of his
traders. `It is duty to implement the decisions of our government,' he
told RFE/RL. `But I think not all the people will agree. I'm afraid that
many of them will close shop.'
By Emil Danielyan
The Armenian government approved on Thursday a three-year plan of
legislative and administrative measures which Prime Minister Tigran
Sarkisian hopes will reduce endemic tax evasion and at the same time end
arbitrary actions of tax authorities.
Sarkisian has repeatedly described improved tax administration as his
chief priority, saying that it is key to fighting against government
corruption and strengthening the rule of law in Armenia.
His appointment as prime minister in early April was followed by a
government crackdown on bribery and other illegal practices within
Armenia's notoriously corrupt customs service and more rigorous
financial inspections of corporate taxpayers.
Sarkisian also formed last June a consultative council of government
officials and businesspeople dealing with the introduction of a `new
culture of tax administration.' The move was followed by the
introduction on July 1 of a new, less cumbersome, procedure for the
filing of quarterly financial reports to the State Tax Service (STS).
The program adopted by Sarkisian's cabinet commits the STS and other
government bodies to taking more such measures in the next three years.
As part of the tax reform, ministers also approved a raft of amendments
to Armenia's Customs Code and a dozen laws regulating taxation. A
government statement said they will be submitted to the National
Assembly soon.
Speaking at the weekly cabinet meeting, Sarkisian said the reform will
primarily target large companies suspected of grossly underreporting
their earnings. He said it will also result in an `environment of soft
tax administration' for small and medium-sized businesses The latter
have born the brunt of crackdowns on tax fraud announced by the
government until now, frequently accusing the STS of arbitrarily forcing
them to pay more taxes.
So far there have been no indications that Armenia's largest and most
lucrative businesses, typically owned by government-connected
individuals, have significantly boosted their contributions to the state
budget. The government's total tax revenues soared by 35 percent to 275
billion drams ($916 million) in the first half of this year. However,
much of the gain resulted from increased proceeds from valued-added tax
(VAT), suggesting that tax collection is improving largely at the
expense of ordinary consumers, rather than the rich. Corporate profit
tax generated less than 17 percent of the first-half revenues, compared
with a 51.5 percent share of VAT.
The government underlined its heavy reliance on VAT earlier this week
when it ordered the mandatory use of cash registers by thousands of
small traders selling prepared foodstuffs, clothing and other consumer
goods in retail markets across Armenia. Sarkisian again defended what
promises to be a highly controversial measure as he unveiled the tax
reform package on Thursday. `If we can't get information about the real
turnover in [retail] trade, we will fail to fight against the shadow
economy and to collect more taxes,' he said.
The Armenian premier also stressed the importance of public support for
the government's reform agenda. `We need to receive the public's support
if are to succeed in this endeavor,' he said. `It is our duty to give
the public accurate information about steps taken by us.'
Government Targets Markets In Crackdown On Tax Evasion
By Anna Saghabalian
Risking protests from thousands of small traders, Prime Minister Tigran
Sarkisian announced on Tuesday a government crackdown on marketplaces
across Armenia which he said account for much of the country's retail
trade and grossly evade taxes.
The crackdown is the latest in a series of government measures meant to
combat widespread tax evasion in the country.
Sarkisian said earlier that the abundance of retails markets, where
traders enjoy preferential forms of taxation and do not have to follow
accounting rules mandatory for other businesses, is a major source of
tax fraud. That, he said, significantly reduces proceeds from the
collection of value-added tax (VAT), the number one source of the
Armenian government's tax revenues.
The Armenian premier unveiled a government plan to address the
`extremely serious problem' at a public meeting on Tuesday with the
owners and managers of several dozen major markets that mostly sell
clothing, electronics items and other household goods. `We can not fight
against the shadow economy as long as 80 percent of retail trade in the
Republic of Armenia is not taxed,' he said.
At the heart of the plan is the mandatory purchase and use of cash
registers. Market administrations are supposed to ensure that all
traders input their sales in the devices starting from October 1 or face
heavy fines. They must sign relevant contracts with the traders by
August 15.
`Sanctions for failure to comply with these rules will be substantially
toughened,' warned Sarkisian. `This situation can not be tolerated
anymore.'
Previous Armenian governments already attempted to introduce cash
registers in the markets in the past, but eventually backed away in the
face of angry street protests by traders. Sarkisian made clear that his
cabinet would not bow to such pressure.
Some of the market chiefs attending the meeting made no secret of their
reluctance to go along with the government measure. Vagharsh Abrahamian,
who runs a jewelry market in the center of Yerevan, complained that they
were not given enough time to enforce the new rules. `But we must still
comply,' he said.
Simon Aghazarian, the manager of a similar market in the city's
Malatia-Sebastia district, said the measure will hit hard many of his
traders. `It is duty to implement the decisions of our government,' he
told RFE/RL. `But I think not all the people will agree. I'm afraid that
many of them will close shop.'
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