Central Bank of Armenia forecasts 2.2-3.2%GDP growth for 2017 and 2.8-3.9% growth for 2018

ArmInfo. In its monetary policy program for Q1 2017, the Central Bank of Armenia (CBA) forecasts 2.2-3.2%GDP growth for 2017, 2.8-3.9% growth for 2018, and 3.2-4.4% growth for 2019. The GDP growth for 2016 is mentioned at 0.3-0.5% versus the previous 1.3-1.8%. These are the forecasts with 30% probability, while the forecasts with 90% probability mention 1.2-4.6% GDP growth for 2017, 1.3-5.8% growth for 2018, 1.3-6.7% growth for 2019.

The CBA says that the GDP growth will accelerate mostly due to expansion of export capacities by means of supplying new range of goods to the new markets given the Government's policy supporting the export- oriented companies. Meanwhile, given the expected long-term economic tends in the trade partner countries, as well as the structural changes in the Armenian economy, the long-term balanced GDP growth is estimated at 4-5%, and the current potential GDP growth - at 1-1.5%. However, the CBA thinks that both the long-term and mid-term GDP growth may slow down unless rapid structural reforms and essential growth of investments in export-oriented sectors of economy are ensured. In 2018-2019, the return on investment will be high if the investments are mainly comprised of direct foreign investments or funding at the expense of domestic savings.

In 2017, the industrial sector is expected to demonstrate 4.4-5.2% growth (versus 5.5-6.1% expected for 2016), construction is expected to drop 2.5-3.1% (versus 1.8-2.6% expected decline for 2016), services will grow by 2.4-3% (versus 2.2-2.6% expected rise for 2016), agriculture will rise by 4.5-5.3% (versus 0.7- 0.1% forecasted decline for 2016). In 2018-19, industry will rise by 5-6%, services - by 3.2-4%, construction - by 0.7-1.3%, and agriculture - by 4-5%.

According to the CBA's forecast, in 2017 individuals' transfers are expected to grow by 4-6% (versus 6- 8% forecasted decline for 2016) due to the recovered economic growth in Russia, whose share is the biggest in the transfers to Armenia. The current account deficit against GDP will make up 0-2% in 2017 (versus previously forecasted 1.5-2.5% for 2017 and 2-3% forecasted for 2016). Export of goods and services is expected to grow by 5-7% in 2017, while import will rise by 0-2% (versus previously forecasted 14% growth in export for 2016 and 0% growth in import).

To note, the World Bank forecasts Armenian GDP growth at 2.7% for 2017, the IMF - at 3.4%, the Eurasian Development Bank - at 2.9%, Fitch - at 2.1%, and the Armenian state budget mentions 3.2% GDP growth for 2017.  In Jan-Dec 2016, the economic activity growth in Armenia slackened to 0.5% from 3.1% in 2015, with services (7.1%) and industry (6.7%) remaining the economy drivers.

According to the Central Bank of Armenia, in 2016 the inflow of individuals' transfers to Armenia dropped by 6.1% to $1.5 bln, while the outflow grew by 7.4% to $817 mln. As a result, the net inflow of individuals' transfers fell by 17.8% in 2016. The inflow of transfers from Russia to Armenia dropped by 11.1% to $896.9 mln in 2016, while the outflow grew by 16.5% to $333.4 mln, and the net inflow of transfers from Russia amounted to $563.5 mln (down 22% versus 2015).  Russia's share in the inflow and outflow of transfers was the biggest - 58.5% and 40.8% versus 61.8% and 37.6% a year before.