Armenia sees economic growth and mortgage lending boost

PanARMENIAN.Net - In January 2010, inflation was estimated at 7% in Armenia.

Average salary in Armenia totaled AMD 101 704 in January 2010, thus increasing by 8,8% against the last year’s index.

In January 2010, the salary in government-financed organizations increased by 12.3% compared with 2009 data, to comprise AMD 86 499 per month. In private enterprises, the salary grew by 5.2%, totaling AMD 123 966.

According to the National Statistical Service, monthly salary index registered a 22,3% decrease in January 2010 compared with last year’s results.

At the same time, 1,7% consumer price increase is registered in January 2010, compared with 2009 data.

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More evidence that the global credit crunch is easing comes from the latest Grant Thornton International Business Report (IBR) which reveals that privately held businesses (PHBs) around the world are increasingly confident that access to finance will be easier in 2010. 35% of businesses said they thought access to finance would be 'more' or 'much more accessible' in 2010 compared with only 14% who were similarly positive 12 months ago.

Businesses were also asked how supportive they believed their lenders to be. 69% feel their lender is currently being 'supportive' or 'very supportive' towards their business - unchanged from 2009. However, huge global differences appear when lender support is compared to accessibility of finance suggesting that business success in 2010 may be something of a global lottery, depending on where a business is based.

The picture varies considerably depending on where a business is based. Four scenarios emerge.

The largest number of economies still sit in the bottom left quadrant with the lowest expectations about access to finance and with a perception that their lenders are the least supportive in the world. Many, like France, Greece, Ireland, Russia and Thailand are amongst the most generally pessimistic of the 36 economies surveyed this year. Perhaps more surprising is the presence of mainland China where businesses, despite being the 12th most optimistic in the 2010 IBR optimism/pessimism index, still fall below the global average in terms of their expectations for access to finance in 2010.

At the other end of the scale, the top right quadrant shows economies where businesses expect finance to be more accessible than the global average and who believe they enjoy above average support from their lenders. Chile, India and the Philippines are the most confident, but a number of major economies have also moved into this quadrant since 2009 - including the US, New Zealand, Hong Kong and Singapore.

In the top left quadrant, Japan, Poland, Malaysia and Spain believe their prospects for raising finance are low despite having supportive lenders and it is no coincidence that the IMF's official GDP growth forecasts for all these countries are below 3%, the global average for 2010.

Businesses from many countries in the bottom right quadrant (such as Armenia, Brazil, Finland and Turkey) have historically taken this position so despite their continuing belief that their lenders are unsupportive, they are without exception more optimistic that access to finance will significantly improve in 2010.

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The Central Bank of Armenia registered and issued a license to “Apartments for young families” UCO on February 16, 2010.

“About 300 young Armenian families will be able to buy accommodation at moderate prices,” Mher Yedigaryan, Executive director of the UCO, told journalists during a press conference in Yerevan on February 19.

“Apartments for young families” government’s target program consists of two components: first, the RA government's subsidies for interest rates on mortgage and, second, provision of cheap funds to the crediting organizations, by enabling them to set favorable mortgage rates.

“Program beneficiaries will be able to apply to banks, where they will get a mortgage at a rate lower than the market ones, should they meet certain requirements. After that UCO will refinance the mortgages,” he said.

According to Mher Yedigaryan, the Central bank of Armenia is a founder of “Apartments to young people” UCO, and the company’s registered capital comes to AMD 3 billion. The credits will be given with 8,5-9% per annum, mortgage pre-payment will come to 30% and 15 years maturity period. In compliance with the program, the mortgage size will amount to AMD 16 million for Yerevan and AMD 10 million for purchasing an accommodation in regions.

Ararat Ghukasyan, the Chairman of the Union of Armenian Banks, stated for his part that all 22 banks functioning in Armenia welcome the establishment of the UCO. Moreover, negotiations with 10 more banks are in process. Agreements will be concluded a week later. Shortly after that, the banks will start giving mortgages. They are interested in the above due to the fact that they'll attract new clients for minimum 10 years. In addition, the banks will get their margin, and it’ll be a good start for the development of the mortgage market in Armenia.

The Chairman of the Union of Armenian Banks also mentioned that it's a pilot program and considered revision of certain requirements, particularly, an introduction of new mechanism such as storage system.

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“Apartments for young families” program was approved by the RA government, during a session held on January 29, 2010. All the families wishing to get a mortgage should meet certain requirements: family’s gross income should amount to approximately AMD 300-350 thousand, including incomes of all family members. Besides, the “young family” definition means family, where the spouses' cumulative age doesn't exceed 60 and none of the spouses is over 35. The definition also covers families, where the age of the only parent does not exceed 30.

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Since July 2009, the volume of loans refinanced by National Mortgage Company reached AMD 3.1 billion, Mher Yedigaryan, chief executive of “Apartments for young families” UCO said.

401 loans have been provided to residents, another 25 loans will be issued by February 25, he said.

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Chairman of the State Commission for the Protection of Economic Competition (SCPEC) of Armenia Davit Harutyunyan met with head of the Yerevan office of the European Bank for Reconstruction and Development (EBRD), Valeriu Razlog, as well as chief economist of EBRD Helena Schweiger, the SCPEC press service reported.

Author of the report "Transition phase and indicators of Mongolia and the CIS" Helena Schweiger is in Yerevan to prepare a report for 2010. At the request of EBRD representatives, Davit Harutyunyan described main functions and tasks of SCPEC, as well as the competition legislation of Armenia. The sides agreed on further cooperation.

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In accordance with October 16, 2009 contract with RA Ministry of Finance, a credit of USD 40 million (6-month maturity period, 11% annual interest rate) was provided to ArmRosGazprom CJSC.

As of February 17, 2010, an early payment of USD 30 956 080 was effected, with over USD 974 000 of interest money returned.

Credit balance of USD 9 043 920 will also be paid ahead of the time-limit stipulated.

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During a session on February 18, the Armenian government approved the amendments to be introduced in the RA law on banks and banking and RA law on joint-stock companies.

Arthur Javadyan, Chairman of the Central Bank of Armenia, highlighted that in compliance with the introduced changes, the banks acting on the territory of Armenia are not allowed to keep their own register of shareholders. “According the law, investment companies have no right to keep the shareholders’ register and shall delegate the functions to a relevant authorized body. The latter shouldn’t be anyhow associated with the companies,” he added.