Central Bank of Armenia slightly downgrades GDP growth forecast for 2016 from 2.7-3.6% to 2.8-3.4%

ArmInfo. The Central Bank of Armenia has slightly downgraded the GDP growth forecast for 2016 from 2.7-3.6% to 2.8-3.4%, according to the CBA's Monetary Policy Program for Q3 2016. The CBA explains this with higher (than expected) growth in industry and services.  By late 2017, the economic growth may total 3-4.5% due to the effective implementation of the governmental program on investment and export promotion, gradual improvement of the foreign economic situation and influence of the ongoing structural reforms. The long-term balanced economic growth is estimated at 4-5%.

In the industrial sector, the growth forecast for 2016 has been upgraded to 7.9-8.7% from 3.2-4%; in construction the forecast has been downgraded to negative 1.3-0.5 (versus the previous forecast from negative 0.8% to negative 0.4%); in services the growth forecast has been retained at 3.8- 4.4%; in in agriculture the growth forecast has been downgraded to 1-1.8% from 4-5%.

According to the CBA's forecast, in 2016 the amount of individuals' transfers will drop by 6-8%. This demonstrates a decline slowdown from 9-12% (in terms of USD) as compared with the forecast made in early 2016. The CBA explains this with the deceleration of economic downturn in Russia and neutralization of expectations about the Russian ruble devaluation. As a result, the deficit of the current account against GDP will rise to 2-3% (versus previously expected 1-2%), stabilizing within this range in the mid-term outlook. The CBA says that export of commodities and services will grow by 11-13%, while import will decline by 1.5-3.5%.

To recall, the International Monetary Fund (IMF) has upgraded its forecast for Armenia's economic growth in 2016 to 3.2% from 2.25-2.5%, with acceleration to 3.4% in 2017. The World Bank forecasts 1.9% (vs previous 2.5%) GDP growth for Armenia in 2016, and 2.8%-2.9% in 2017-2018. EBRD forecasts 2% economic growth in 2016. The state budget of Armenia fixed 2.2% GDP growth in 2016, deflator index - 4%, 12-month inflation - 4% (+1.5%). According to the National Statistical Service of Armenia GDP growth in Armenia in 2015 totaled 3% versus 3.5% in 2014. According to the statistical data economic activity in Jan-Aug 2016 grew by 2.4% y-o-y versus 3.9% growth in the same period of 2015 mainly due industry (7%) and services (8%). In Jan-Aug 2016 exports grew by 18.9% versus Jan-Aug 2015, while imports dropped 2.1% (versus 0.5% rise and 26.3% decline, respectively, a year before).

According to the Central Bank, in 2015 the amount of individuals' transfers to Armenia dropped by 24% to $1.6 bln, while the transfers from Armenia declined by 16% to $0.8 bln. Russia had the biggest share in both the inflow and outflow - 63% and 37%, respectively. The net inflow of transfers to Armenia from Russia started dropping in 2014 (down 13%) following growth in the previous four years: in 2010 - by 24%, in 2011 - by 25%, in 2012 - by 18.2%, in 2013 - by 7.2%. Over the past 2 years, the inflow of transfers from Russia to Armenia dropped by almost $730 mln, in 2015 alone - by $554 mln versus 512mln USD decline in the crisis-affected year 2009. In Jan-July 2016, the inflow of individuals' transfers to Armenia fell by 11% versus Jan-July 2015 and totaled $768.1 mln, while the outflow grew by 21.2% to $424.7 mln, with the net inflow falling by 23.2% to $343.3 mln. By August 2016, Russia's share dropped in the inflow from 62% to 58.5%, and rose in the outflow from 35% to 45%.