How2B · Let’s Talk Numbers #2 · 24 minutes

🔘 The economic activity index in February
🔘 What is hidden behind the high indicator
🔘 Which sectors are recording growth
🔘 What economic growth in Armenia will be like

On How2B we “talk in numbers” with economist Aghasi Tavadyan.

Armenia’s economic activity index jumped in February 2024. February 2024 brought a year-on-year rise of 16.3 percent, and almost all of that came from one month: February itself rose 11.2 percent on January. In the video he asks what sits behind a number this strong. His answer is that it does not come mainly from good news about domestic production.

Readings like this are unusual for the recent past. The index had been slowing through the middle of 2023. Before that, the highest twelve-month rates in this series came in 2022, when the rolling average stayed close to that level. That level was held for several months, while this February’s rise came from a single month instead of a steady climb.

In his reading, the main driver is money arriving from abroad in large inflows. Large inflows from Russia, including capital and transfers, fed construction, retail and real estate after 2022. Re-exports of gold and precious stones added to that. Some of this trade passes through Armenia on its way from Russia to the UAE and Hong Kong, so it shows up in exports and activity figures without adding much local production.

He is uneasy about how the data is put together. Agriculture is no longer published monthly, which makes its trend hard to follow. Services, including banking and IT, have been slowing, and he worries the next months could bring negative readings in those sectors. Those sectors feel the pressure first, since capital has begun leaving the country.

The strength, he argues, comes from outside money and says little about any wider recovery. The government’s target sits well above the trend he expects, and he thinks the economy is more likely to settle nearer its longer-run average. That average, he adds, is hard to beat on borrowed or transferred money, because such growth does not create the new productive firms that would keep the economy growing without it.

Topic Analysis: Precious Effect: Reasons for the 2024 Economic Growth