EBRD Reconsidering Forecast on Armenias Economic Growth Falling to -1.5%

European Bank for Reconstruction and Development has updated its forecast on Armenia's 2015 GDP at -1.5%.

EBRD's official statement reads that Armenia's economy slowed down significantly in early 2015, driven by plummeting remittances (by 40% - editor's note) and shrinking exports (by 23% - editor's note).  According to EBRD experts, real GDP growth is likely to be negative in 2015. After rapid but mild devaluation in late-2014, Armenian dram stabilized, helped by tight monetary policy and central bank interventions. Nevertheless, contagion from the currency to the banking sector has been contained, but the credit activity grounded to a halt. Despite a successful Eurobond placement in March, end- March foreign currency reserves were 25 per cent lower than a year ago, at around 3.5 months of imports. Fiscal space is limited by an increased public debt-to-GDP ratio.  Prospects of quick economic recovery in 2016 will depend on the external environment, mainly in Russia. We forecast GDP growth at -1.5 per cent in 2015 and +1 per cent in 2016.

To remind, earlier on EBRD damped its forecast on Armenia's GDP growth in 2015 dropping it from 3.5% to 0 and only after to -1.5%.  International financial bodies have damped their forecasts on the Armenian economic growth in 2015: EDP forecasts a 3.8% GDP growth, IFM - 0% stagnation, ADP- 1.6% GDP growth, American rating agencies have their own estimations: Fitch forecasts moderate recession because of the situation deterioration in Russia, while Moody Agency forecasts a 2.3% growth. The RA Central Bank estimates the country's 2015 economic growth 0.4- 2% rolling back the previous 3.2-3.5% indicators. 

Russia is to suffer significant slacks: by 4.5% in 2015 and approximately 2% in 2016. This might be followed by a long-lasting slow growth or stagnation. Fall in oil prices and sanctions have impaired Russia's already ailing economy that has serious structural flaws. The negative trends of the Russian economy extinguish the prospects if Eastern European, Caucasian and Central Asian countries.  In 2015 the Georgian economic growth will slow up to 2.3% and in 2016 - 2.6%. Azerbaijan's GDP growth will remain at 1.5% in 2016, too.

EEU partner-country Kazakhstan's economic growth will deteriorate conditioned by fall in raw commodities prices; the economic growth here will make 1.5% in 2015 and 2% in 2016. Belarus will still suffer financial hardships - according to the updated forecast, in case of sticking to the current policy, the country's GDP will decrease by 2.5% in 2015. Lack of significant economic reforms will cause stagnation of production in 2016. GDP growth in Kyrgyzstan will make 3.0% and in 2016 - 3.1%.

It is noteworthy, that EBRD has made lots of investments in Turkey, yet this country's rate of growth will remain almost unchanged.  According to EBRD, the growth of Turkish e4conomy will be 3% in both 2015 and 2016, which is much lower than this country's long-term potential.