Identifier
Created
Classification
Origin
08YEREVAN983
2008-12-09 08:39:00
CONFIDENTIAL
Embassy Yerevan
Cable title:
GLOBAL FINANCIAL CRISIS: ARMENIA BEGINNING TO FEEL
how-toVZCZCXRO1705 PP RUEHLMC DE RUEHYE #0983/01 3440839 ZNY CCCCC ZZH P 090839Z DEC 08 FM AMEMBASSY YEREVAN TO RUEHC/SECSTATE WASHDC PRIORITY 8385 INFO RUCNCIS/CIS COLLECTIVE PRIORITY RUEHAK/AMEMBASSY ANKARA PRIORITY 1675 RUEHIT/AMCONSUL ISTANBUL PRIORITY 0723 RUEATRS/DEPT OF TREASURY WASHDC PRIORITY 0569 RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC PRIORITY RHEHNSC/NSC WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 05 YEREVAN 000983
SIPDIS
E.O. 12958: DECL: 12/02/2018
TAGS: ECON EFIN EINV ETRD AM
SUBJECT: GLOBAL FINANCIAL CRISIS: ARMENIA BEGINNING TO FEEL
EFFECTS, WITH MORE ON THE HORIZON
Classified By: Ambassador Marie L. Yovanovitch. Reasons 1.4 (b/d)
SUMMARY
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C O N F I D E N T I A L SECTION 01 OF 05 YEREVAN 000983
SIPDIS
E.O. 12958: DECL: 12/02/2018
TAGS: ECON EFIN EINV ETRD AM
SUBJECT: GLOBAL FINANCIAL CRISIS: ARMENIA BEGINNING TO FEEL
EFFECTS, WITH MORE ON THE HORIZON
Classified By: Ambassador Marie L. Yovanovitch. Reasons 1.4 (b/d)
SUMMARY
--------------
¶1. (C) After initially expressing only moderate concern about
the impact on Armenia of the global financial crisis, GOAM
officials have begun to acknowledge negative effects,and
appear to be taking a prudent approach. Growth in
construction, real estate sales and other investments has
slowed as investors scaled back their activity, falling world
mineral prices created a serious crisis in the mining
industry, and loss of U.S. clients devastated the IT
industry. The country's banks remain in relatively healthy
condition, though they are becoming even more careful about
lending and interest rates have increased as banks compete
for customer deposits. The Central Bank (CBA) is crafting its
monetary policy options and since October has been propping
up the Armenian Dram (AMD) in order to forestall panic among
depositors and protect itself from foreign exchange exposure.
Armenia's primary vulnerability may come from Russia, source
of most of the country's remittances, and up to 15 percent of
Armenia's GDP. Although the negative effects of the crisis
have been modest to this point, we expect to see further
problems in the months ahead as foreign remittances decrease
and sectors in the real economy--especially mining and
IT--are hit. The GOAM has already asked for additional US
assistance in the form of budget support as a cushion against
a potential downturn, and we expect that if the situations
worsens, there will be other, urgent requests for assistance.
END SUMMARY.
ISOLATION SEEMED TO HAVE ITS BENEFITS
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¶2. (SBU) As Armenia is not tightly integrated into the global
financial system, and Armenian banks have not been involved
in risky financial transactions, the public position of GOAM
officials and financial institutions at the onset of the
global economic crisis was that Armenia would avoid much of
its impact. Armenia remains largely a cash-based economy,
with Debt/GDP ratios of about 20 percent (compared to over
100 percent in the most-developed countries),and
conservative banking standards; mortgage loan-to-value ratios
are typically 70 percent (though have been increasing
recently),and the capital adequacy requirement of Armenian
banks is 12 percent, compared to eight percent in the U.S. In �