ARMENIAN ECONOMIC PERFORMANCE FAVORABLE.

GDP in the first eleven months of 2000 grew 4.3 percent despite the summer drought, which was predicted to cause severe difficulties in the agricultural sector. As it turned out, agricultural output in the first eleven months was down only 3.0 percent and did not significantly drag down growth. At the same time, value-added in industry is estimated to have risen 4.7 percent, led by the mining industry, though consumer goods production also did well. Construction output performed even better, up 20.1 percent, and retail trade increased 7.9 percent–due in large part to 14.5 percent real growth in average salaries (Armenian National Statistics Service, January 2001). Expanding exports helped boost industry and GDP. In the first eleven months, exports were up 23.4 percent to US$261.9 million. Cut diamonds and jewelry accounted for a large portion of total exports (42.5 percent) followed by nonprecious metals (15.2 percent) and mineral products (11.5 percent). Although imports increased only 8.6 percent, they totaled US$788.5 million, leading to a sizeable deficit of US$526.6 million (Russian agencies, January 21).

Armenian price levels are highly sensitive to imports prices. Given the drought which affected not only Armenia but neighboring countries as well, food prices–food products accounted for 24.5 percent of total imports–have increased noticeably in the last several months. Due to these increases, inflation was up 2.4 percent in December and 4.6 percent in January (Russian agencies, February 4). Nevertheless, average inflation was down 0.8 percent on average for all of 2000, due to consistent deflation over the last year, and up only 1.3 percent year-on-year in January 2000 despite the recent rises. Economic growth is forecast to be strong in 2001 which, together with somewhat loose fiscal policy, may lead to additional inflationary pressures this year. Nevertheless, tight monetary policy will likely keep consumer prices under control. Economic growth will also lower the unemployment rate, which was last reported at 11.1 percent in October 2000, down from 11.5 percent a year earlier, even further (Russian agencies, December 24, 2000).

NEEDED INTERNATIONAL LENDING FOR ARMENIA LIKELY TO RESUME.