Friday, July 13 2018 12:55

ArmInfo. Eurasian Development  Bank experts forecast that high rates of economic growth will  maintain in Armenia in 2018. According to the EDB Macro review for  June this year, economic activity will be supported by stimulating  monetary conditions and expansion of external demand.

It is expected that the country will continue to implement structural  changes in the economy that are capable of increasing potential  growth rates, primarily due to export-oriented industries. As a  result, the GDP growth in 2018, according to the EDB, will be 5.6%  and by 2020 it will stabilize at about 5%.  Inflation in 2018 will be  4.1% and in the midterm it is forecasted close to inflation target of  the Central Bank. The domestic demand and an increase in tax rates of  excises will exert upward pressure on prices this year. Increasing  inflationary pressures will cause a gradual reduction in monetary  stimulation of the economy. A planned increase in the refinancing  rate to its neutral level, estimated by the EDB at 7-7.5%, is  expected.

The authors of "Macro Monitoring" report note that according to the  results of the first quarter of 2018, Armenia's GDP grew by 9.6%  compared to the same period of the previous year (11% a quarter  earlier).  Growth s ensured due to increasing consumer demand at the  background of growth in wages and the maintaining double-digit growth  of transfers of labor migrants. The volume of retail trade in the  first quarter increased by 3.7% compared to the first quarter of  2017. Due to restoration of external demand and successful  implementation of the action plan on stimulating export for the third  year in a row the export maintains a leading position in the  formation of economic growth. As a result of the first quarter, the  value of exports increased by 34.4% compared to the same period last  year. At the same time, expanding import of goods (the growth of the  value volume in Q1 2018 by 39% versus Q1 2017) continued to have a  deterrent effect on economic activity against the backdrop of an  increase in domestic demand.

The effect of the low base was reflected in the acceleration of  growth in construction and agriculture, where output in Q1 increased  by 23% and 2.2% respectively, compared to the same period last year.  Industry demonstrated opposite dynamics, where, despite significant  support from external and internal demand, the annual growth rate in  the I quarter slowed to 8.2% compared with 16.2% a year earlier.

Nominal effective exchange rate of dram continued to depreciate  (4.9%) supporting the price competitiveness of Armenian goods in  foreign markets. The reactivation of economic activity in the  countries - trading partners of Armenia contributed to the  maintenance of high growth rates of remittances of labor migrants.  According to the Central Bank of Armenia, in Q1 2018 the volume of  money transfers grew in dollar terms by 14.5% compared to the  corresponding period of the previous year, including from Russia by  22.1%.

Meanwhile, the deficit of the state budget of Armenia in the first  quarter of 2018 was 26.3 billion drams (19.2 billion drams a year  earlier). Expenditures of the state budget decreased by 2.6% compared  to the first quarter of 2017, which is mainly due to a decrease in  transfers to the economy (by 25.1%) and expenses for the purchase of  services and goods (by 18.6%). At the same time, the decline in state  budget revenues was 5.4% compared to Q1 2017.

In 2018 the Armenian authorities intend to continue the policy of  budgetary consolidation. It is planned to reduce the deficit of the  state budget to 2.7% of GDP from 4.7% of GDP in 2017. The increase in  the country's debt obligations in the previous year was reflected in  a significant increase in public debt servicing costs, which in Q1  2018 by 16.8% % exceeded the level of the same period of the previous  year.  In the first quarter of 2018, Armenia's public debt continued  to grow and reached about $ 6.9 billion. The increase in debt by $  112.5 million since the beginning of this year was mainly due to the  attraction of external government debt (an increase from the  beginning of the year by $ 70.5 million).