Central Bank of Armenia upgrades economic growth forecast for 2015 to 3.2-3.9% and downgrades it to 1.6-2.7% for 2016

 

The CBA explains that the actual growth of industry and services in H1 2015 exceeded the expectations. Meanwhile, amid the domestic demand decline, the economic growth will be ensured by late 2015 at 

the expense of export growth only.    

 

In 2016, the economic growth will slow down to 1.6-2.7% due to the slackening of growth in gross agricultural output and industry, as well as retention of low expenditures as opposed to the growth in 

domestic and foreign demand in the light of the expected increase in the transfers from Russia, certain economy growth in the partner states of Armenia and dampening of the monetary terms. Previously the 

CBA expected the economic growth to accelerate from 1.4-2.8% to 2.5-3.4% in 2016.

 

In 2017, the economic growth will accelerate to 3-4.5% due to the governmental projects on stimulation of export and investments, gradual improvement of the foreign economic situation, as well as infrastructure reforms. In 2017 the economic growth will mostly be ensured at the expense of the export increase. 

 

Given the slackening of the economic growth in the key partner states of Armenia amid the deepening uncertainties and the slowdown of the foreign investment flow, as well as the low economic activity inside the country, the long-term economic growth in Armenia is expected to be within the 4-5% range.     

 

According to the updated forecast of the CBA, in 2015 industry will grow by 6-6.4% versus the previously expected 4-4.5% growth. The forecast was upgraded because mining has grown more than expected. In 2015 the development of the Teghout mine and the entry to the new markets will contribute to ensuring the expected economic growth. Within the next three years, industry will grow by 4-5.5% mostly due to a number of investment projects and the Government's export support policy. 

 

Construction is expected to decline by 2-3% in 2015 versus the previously expected 1-1.5% growth. The CBA downgraded the forecast because the growth rates registered in H1 2015 failed to justify the 

expectations. The CBA expects that amid the low investment activity, the construction companies will reduce the construction carried out at their own expense. Meanwhile, the state-funded construction will 

also drop. Within the next three years, the removal of the imbalance between demand and supply will make it possible to ensure 1-2% growth versus the previously expected 1.5-2.5% growth due to large 

construction projects and private investors.

 

Services will grow by 1.4-1.8% versus the previously expected 1-1.5% growth. The CBA notes that the expected growth yields to the average weighted indices of the past few years due to reduction in trade and related services amid the weak domestic demand. Within the next three years, the CBA expects services to increase by 3.5-4.5% (versus the previous 4-5% growth) due to gradual restoration of the domestic demand and expected increase in tourism. 

 

Agriculture growth forecast has not been changed - 10.5-11.5% (versus the previously expected 6.5-7.5% growth). The growth will be ensured due to the high growth rates in plant growing and fish breeding, as well as moderate growth in cattle breeding. Within the next three years the agriculture growth may accelerate to 5-6% and the retention of the mid-term relatively high rates will be due to the governmental measures aimed at enlarging the greenhouse facilities, increasing the 

cattle stock, improving the export logistics, etc.