Armenia Economic Outlook
After Q4’s deceleration, data points to a further slowdown in Q1. Economic activity growth averaged lower in the quarter compared with Q4 due to weaker expansions in retail sales and industrial production. That said, a broad-based improvement across most sectors in March, coupled with stronger credit growth throughout the quarter, suggests that the economy strengthened heading into Q2. In other news, tensions with Azerbaijan have escalated. On 11 April, deadly fire broke out between the two countries close to the contested Lachin Corridor. Each side blamed the other for the clash, which was the deadliest since last September. Later, on 23 April, Azerbaijan established a checkpoint on the Corridor, which has fueled tensions further and will likely take a toll on trade in the region.
Inflation dropped to 3.2% in April from 5.4% in March, marking a 25-month low. The decline was spearheaded by softer price pressures for food and housing and utilities. Meanwhile, the Central Bank decided to hold rates at 10.75% at its 2 May meeting. Going forward, the Bank is seen easing its rates amid softer inflation.