World Bank upgrades Armenia`s economy growth forecast to 3.1% with further acceleration to 3.3-3.6% in 2017-2018

ArmInfo. The GDP growth rate is projected to reach 3.1 percent in 2016, 3.3 percent in 2017 and 3.6% in 2018, according to the World Bank's Europe and Central Asia Economic Update "Polarization and Popularism". As the global economy rebounds and Russia's recession passes its nadir, economic activity in Armenia is expected to moderately accelerate over the medium term. However, structural weaknesses and the slow recovery of domestic demand due to stagnant remittances will slow its expansion.

The main driving force of the economic growth according to WB experts is industrial sector, growth of which is forecasted at 7.4% in 2016 (versus 3.6% in 2015) with slackening to 4.3-3.5% in 2017-2018. At this background agricultural growth will sharply decline to 1.2% (versus 13.2% in 2015), in 2017-2018 growth will reach 1.5-1.8%. Growth in services will be only 0.3% (versus 3.2% decline in 2015), 3.9-5.5% in 2017-2018.

A combination of relatively weak revenue collection, moderate economic growth and increased demand for social spending will keep fiscal pressures elevated through the end of 2016. The annual fiscal deficit is projected to reach 4.3 percent of GDP. Public debt stock is expected to exceed 50 percent of GDP in 2016.

Current account balance of GDP will total 2.8% in 2016 versus 2.6% in 2015, with further growth in 2017- 2018 to 3.1-3.3%. The share of state debt in GDP will increase to 52.5% in 2016 versus 48.8% in 2015n in 2017-2018 to 53.8-53.5%. Net foreign direct investments in GDP will grow to 2.5% in 2016 versus 1.6% in 2015 and will remain on this level in 2017 after which will drop to 2.4% in 2018.

According to the report a reformed tax code will facilitate fiscal consolidation over the medium term by improving domestic revenue mobilization by about 3 percent of GDP over 2017-19. The new tax code aims to expand the tax base, rationalize tax rates and close major loopholes in the existing legislation. Modest but positive growth projections for agriculture and industry, combined with an increase in real wages in both the public and private sectors, are likely to support continued poverty reduction during 2017-18. As a result, the poverty rate is projected to decline from 24.9 percent in 2016 to 23.2 percent in 2018. The easing of international sanctions against Iran in 2016 has created a unique opportunity for Armenia to access new export markets and to serve as an overland shipping corridor between Iran and Russia. Moreover, access to Iranian oil may increase competition in the domestic energy market and reduce Armenia's reliance on Russian fuel imports.