Armenia: June GDP data consistent with our upgraded 9.0 percent GDP forecast for the year

CAUCASUS / CENTRAL ASIA - In Brief 25 Jul 2023 by Ivan Tchakarov

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The June short-term economic indicator has lost some vigor. The June short-term economic indicator, released by the Statistical Office today, grew by 6.8 percent YoY (Graph 1). This is sizably lower than its May read of 13.7 percent YoY, although the 2Q23 GDP print, calculated as the average of the short-term indicators over Apr-Jun, still points to a brisk 10.9 percent YoY pace of economic expansion. The moderation relative to the 12.1 percent YoY 1Q23 GDP growth is modest and is consistent with a 1H23 GDP growth of 11.5 percent. There is a reasonably strong historical correlation of about 0.9 between the monthly indicator and the quarterly GDP growth numbers, so that we expect that the official read for the 2Q23 GDP will come in close to the one implied by the monthly indicators. Graph 1 1H23 GDP growth is very strong and running at 11.5 percent YoY Source: Statistical Authorities of Armenia, Author’s calculations. Nevertheless, the Jun indicator has now transitioned to a pace of expansion that is consistent with our upgraded 9.0 percent GDP growth for the year. Last week we discussed in detail why we decided to lift 2023 Armenian GDP growth the most in the CCA region. We upgraided our full-year projection from an already higher-than-consensus 7.0 percent to 9.0 percent. In particular, we contended that the overdrive in economic performance has been facilitated to a large degree by the record-high increase in net exports to Russia as Armenia has been the primary hub in the CIS space for transmitting sanctioned goods to Russia. Our 9.0 percent growth forecast still implies that the economy will slow down to about 6.5 percent in 2H23, which is just about the same as th...