Armenia’s medium-term economic growth to approach 5% a year
This finding is presented in a macroeconomic review for the Republic of Armenia published by the Directorate for Research at the Eurasian Development Bank (EDB).
The authors expect Armenia’s GDP growth to speed up to 6.5% in 2019 driven by recovered outputs mining and metallurgy, as well as higher consumer demand. Compared to the previous forecast (April 2019), the estimate was increased by 1.2 percentage points because of speedier than expected recovery of non-ferrous metal production and high consumer activity. Marat Kussainov, Deputy Chairman of the Management Board at the EDB, believes that Armenia’s growth in 2020-2021 will be around 5.0%, which is deemed as the potential rate. Strong GDP dynamics will be supported by governmental initiatives to improve the investment climate and an increase in fiscal spending scheduled for 2020.
The EDB analysts point out that, for the most part of the first six months of 2019, inflation was below the target interval set by the Central Bank of Armenia (4±1.5%). One of the factors that determined its dynamics was fluctuations of food prices. According to the EDB’s forecast, inflation will reach the mid-point of the Central Bank’s target interval by the end of 2021, driven by the growing internal demand.
The review notes that the Central Bank of Armenia reduced the refinancing rate by 0.25 percentage points, to 5.75% per annum, in January 2019, and then to 5.5% in September 2019 as a result of low price growth. Marat Kussainov suggests that the Central Bank will stick to its stimulating monetary policy in the medium term.
The main risks for the country are associated with the possible worsening of the external environment associated, in particular, with the trade conflict between the U.S. and China. If these risks materialise they may lead to a fall in prices and Armenia’s exports (primarily non-ferrous metals and food products), as well as a decline in foreign investment and money remittances. Other risks include volatile outputs and investment in mining and agriculture.
Additional Information:
The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB's charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.
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