Armenian Economic News

RFE/RL Report

Armenian Economy Shows Further Decline in July
Armenia -- An incomplete construction site in Yerevan, 2009
21.08.2009
Ruben Meloyan

Despite a more optimistic economic outlook that has been presented by
Armenian government officials of late, the country's economy
continued to decline in July amid a deepening fallout from the global
recession, showing a 18.5 percent Gross Domestic Product contraction
in the seven months of 2009.

The country's GDP shrank by 16.3 percent in the first half of this
year, with the government warning that its full-year contraction
could hit a 20 percent rate.

Earlier this month, however, Prime Minister Tigran Sarkisian sounded
more upbeat on the prospects of the economy as he said that the anti-
crisis measures taken by the government should result in a slowdown
of the decline later this year that would ultimately have made only
12 percent annually. The premier said the government also expected
the Armenian economy to grow by a modest 1 percent in 2010.

The current economy decline follows six years of robust growth in the
Armenian economy when it expanded at a double-digit rate largely due
to large-scale housing construction projects.

The global financial crisis resulted in a dramatic reduction of
investments and other money transfers that had serviced the booming
construction and other sectors of the economy.

The volume of construction work carried out in the country shrank by
55.5 percent in the seven months of this year, significantly
contributing to the total GDP fall. This is by one percent worse than
the index posted for January-June.

Economist Ara Nranian, who is a member of the Armenian Revolutionary
Federation (Dashnaktsutyun) faction in parliament, says `nothing
unexpected has happened considering the contents and branch structure
of the economic decline.'

`Construction is one of the main causes of the decline. This again
shows that we have serious problems in terms of our economic
structure and policies. This crisis has only revealed and accentuated
the scale of problems that we've had,' Nranian told RFE/RL.

Earlier this month, Urban Development Minister Vartan Vartanian
argued that the dramatic decline in the construction sector would
ease in the second half of this year thanks to wide-ranging measures
taken by the government.

`There is quite a bit of [construction] activity in the second half,'
Vartanian told RFE/RL. `The government has taken all necessary
measures, and I am sure that quite positive results will be observed
in the second half, both in [private] housing construction and
projects financed from the state budget,' said Vartanian.

The construction sector has been a focal point of government efforts
to alleviate the consequences of the crisis. Last April, the
government approved 20 billion drams ($55 million) in loan guarantees
to private developers struggling to complete their housing projects.
Five construction firms have reportedly received such guarantees
since then.

The government also plans to spend just over one quarter of a $500
million anti-crisis loan provided by Russia on housing construction
in Armenia's northern regions still reeling from the devastating 1988
earthquake. Another $33 million portion of the loan is to be
channeled into a recently established state mortgage fund tasked with
providing relatively cheap housing loans to the population.

World Markets Research Centre
Global Insight
August 14, 2009
Collapsing Armenian Economy Triggers Fitch to Downgrade Sovereign Risk
Rating
BYLINE: Andrew Birch


On 13 August, Fitch Ratings downgraded its long-term foreign currency
Issuer Default Rating (IDR) rating for Armenia by one notch, taking
the rating from "BB" to "BB-". The outlook for the rating was set at
stable. Fitch affirmed its short-term rating for Armenia at "B". The
Fitch IDRs are the closest equivalent to IHS Global Insight's
medium-term sovereign ratings, measuring credit risk at the sovereign
level. Despite the downward adjustment, Fitch's rating remains two
notches above IHS Global Insight's own rating of "B-" on the generic
scale (60 on our own scale). Fitch had last changed its Armenian
rating in July 2008, when it raised its rating from "BB-" to "BB". IHS
Global Insight last adjusted its overall rating for Armenia in March
2009 with a one-notch downgrade. In June 2009, IHS Global Insight
switched its ratings outlook from stable to negative.

Significance:The sharp economic contraction Armenia is suffering
triggered Fitch's downward revision, as the severity of the downturn
substantively undermined the country's credit fundamentals and
weakened the country's medium-term outlook. Despite the downward
revision in the score, Fitch decided to keep its outlook at stable due
to strong support from the global financial community and thanks to
what it regards as appropriate policy responses from Armenian
authorities. The ratings agency also emphasised that Armenia's
external and public indebtedness remained moderate, but that the
downgrade was more a response to the severity of the current economic
downturn. IHS Global Insight's own view towards Armenia's external
financing risks is less benign, reflected by our lower overall
sovereign risk score. Already wary of the impending economic downturn,
we have questioned where the country would be able to earn the
necessary financing to meet its external obligations, prompting our
own sovereign risk actions earlier in 2009. As with Fitch, however, an
even more pessimistic outlook has been averted due to strong backing
from the international financial community.


AVERAGE MONTHLY WAGES 98,583 DRAMS IN ARMENIA IN

JANUARY-JULY - 12.1% INCREASE
ARKA
Aug 21, 2009

YEREVAN, August 21. /ARKA/. Average monthly nominal wages was 98,583
drams in Armenia in January-July this year - a 12.1% increase as
compared with the same period of last year, the RA National Statistical
Service reported.

According to the preliminary information, salary in budgetary
organizations was 82,172 drams in the period - an 18.1% increase
against the level of January-July 2008. Increase in the salary was 5%
in July as compared with the previous month.

Monthly average salary in non-budgetary organizations was 122,324
drams - a 6.9% rise against the level of January-July last year. In
July against June the salary grew by 3.2%.

Overall monthly average salary level went 4.1% up in July against June.

($1=373.95 drams).


Yerevan Authorities Deny Construction Faults Behind Recent City
Floods
21.08.2009
Hovannes Shoghikian

Municipal authorities on Friday denied that several flooding events
in Yerevan in recent months had been caused by errors in the design
of a number of newly built road infrastructure facilities, instead
blaming them on an excessive level of precipitation and clogging of
major rain drainage systems with garbage and dirt.

Last month the Yerevan municipality set up a commission of experts to
look into the causes of a massive flooding in some parts of the city
following a heavy rainfall on July 8. Within a short while, the
flooding turned several streets of Yerevan into canals, with
residents and cars stuck amid rising water. Some rescue effort was
reportedly required on that day. Apart from some property damage, the
floods caused no loss of life or major injuries.

In particular, the commission said the reconstruction of the bed of a
small river flowing through Yerevan was not the reason for the
accumulation of rainwater in one of the downtown streets.

Environmentalists in Armenia have claimed that the narrowing of the
bed of the Getar to accommodate it for the construction of a motor
subway that would relieve busy traffic in the city center is the main
cause of the floods as they argue that the broader riverbed prevented
similar events in the past.

Frunz Basendzian, who is in charge of the construction and city
improvement department at the Yerevan municipality, said specialists
had established that `the flooding of the two newly constructed motor
subways had nothing to do with the work carried out on the Getar bed.'

The official the said the flooding was the result of sudden large
streams caused by an intensive rainfalls descending from the upper
parts of the city that picked up along their way large amounts of
mud, sand, leaves and other garbage, which ultimately resulted in a
clogged up drainage system.

He said the commission had also recommended the construction of a
garbage filter on the river Getar at the point where it enters the
city center area to avoid similar situations in the future.

According to Gagik Khachatrian, another municipality official in
charge of the utilities sphere, as many as seven rain drainage points
in Yerevan are not designed to handle precipitation that exceeds the
norm.

The latest case of flooding in Yerevan was reported on Thursday as a
broad street in the capital's southwestern district became impassible
for vehicles in consequence of a heavy rainfall.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~