ArmInfo. The volume of private consumption has fully recovered in Armenia. This was announced by the chairman of the Central Bank of Armenia, Artur Javadyan, in the Parliament of Armenia on July 6.
According to him, there was a period when these volumes amounted to -2%, but at the present time a new situation has been created, which managed to be formed due to a competent fiscal policy. In addition, the chief banker continued, the situation itself has changed. For example, the volume of private transfers has significantly increased, which since 2014 have been steadily falling. "Today, the situation with transfers is satisfactory, in addition, a serious increase in exports over the past two years and an increase in imports over the past year also indicate a restoration of demand in the domestic market," the head of the Central Bank said, adding that transfers are a challenge for the country's economy.
"I am glad that the share of transfers in the country's GDP today is below 10%. Unequivocally, our policy should be aimed at accelerating economic growth, reducing unemployment, a sharp increase in exports, etc., which will lead to the leveling of private transfer operations In GDP," said the Chairman of the Central Bank of Armenia.
"Now the situation is completely different than it was a year ago, as evidenced by the increased demand for the recent issue of low-yield government bonds by the Ministry of Finance of the Republic of Armenia, for short-term bonds it averaged 5%, medium-term - 5.5%, long-term - less than 3,5%," Arthur Javadyan stressed, adding that, based on existing risks, interest rates can not be very low.
To note, according to the data of the Central Bank of Armenia, the sphere of services and the industrial sector were the main drivers of economic growth in 2016, and from the point of view of gross demand, there was an increase in the level of consumption and export volumes. As noted in the conclusion of the Central Bank of Armenia on the implementation of the state budget for 2016, the current account deficit in 2016 was 2.7% of GDP, remaining at the level of the previous year. As a result of the expanded fiscal policy, the deficit of the state budget exceeded the forecasted level for 2016 by 54.4%, which increased the deficit-to-GDP ratio to 5.5%. Such a growth in the deficit affected the national debt, which, in conditions of low, rather than predicted, GDP levels led to a significant increase in the level of public debt in GDP to 56.7%.
The growth of budget revenues in 2016 was provided by income from direct taxes, mainly income tax, profit tax, as well as excise, turnover tax and targeted social payments. At the same time, revenues from VAT, customs duties, environmental payments and payments for the use of natural resources decreased. The share of budget taxes and duties in GDP reached 21.3% in 2016. The coefficient of elasticity of taxes growth in 2016 to 1.6% from 0.1% in 2015. Current expenditures of the state budget grew by 3.5% in 2016, and expenditures on non-financial assets - by 1.7%.
As a result, a lower performance of the state budget revenue (92%) than the expenditure part (over 99%), a deficit of 278 bln AMD was formed, against 180 bln AMD planned for 2016. Placing state bonds and attracting loans from external sources in excess of the amount planned financed the prevailing level of the difference. This led to a significant change in the share of financing sources of the deficit in 2016: domestic - 38.6% and external - 61.4%, against 4.7% and 95.3% respectively in 2015.
The unprecedented growth in the volume of financing the budget deficit from internal sources is due to a significant increase in excess liquidity in the banking system, which is accompanied by a decrease in interest rates, as a result of the expansionary monetary policy conducted by the Central Bank in 2016, which generated a significant demand for government bonds. As a result, the volume of government bonds in circulation increased by 58.5% in 2016 to 187.6 billion AMD, against the planned 42 billion. The yield of government bonds in 2016 was 13.15%, compared to 13.99% in 2015, their circulation period increased to 2208 days from 2065 days in 2015, with the distribution of the repayment load until 2036. Moreover, in December 2016, by the same period of 2015, the average yield of short-term government bonds decreased by almost 5 pp to 6.9%, medium-term - by 5.4 pp - to 10.1%, and long-term - by 3.7 pp - up to 12.9%.
Inflation in 2016 remained at a low level and was lower than the forecasted bar of the Central Bank. The main influence on domestic prices was exerted by the deflationary trends that persisted on external commodity markets, the continued decline in remittances and the formation of low prices for food products. The Central Bank, evaluating the environment as a low-inflationary one, pursued an expanded monetary policy during the year, reducing the refinancing rate by a total of 2.5 pp in 2016 to 6.25% by the end of December. The easing of monetary conditions led to a decrease in interest rates on the financial market and yield of government bonds. Thus, the average weighted yield of government bonds in 2011 was 11.1% compared to 14.6% in 2015. From IV quarter gross demand began to recover, neutralizing deflationary trends, as a result of which inflation was 2.7% against 1.9% in the same period of a year ago, and in January-December 2016 deflation was registered at 1.1%.
In the long term prospect, based on the primacy of providing the foundations for stable economic growth, the CB attaches particular importance to the consistent and effective implementation of RA government programs aimed at promoting investment and infrastructure reforms.
To recall, the World Bank (WB) predicts GDP growth in Armenia in 2017 by 2.7% with the acceleration of the rate in 2018 to 3.1%, in 2019 - up to 3.4%. The state budget of Armenia for 2017 laid the GDP growth by 3.2%. According to the updated forecast of the Central Bank of Armenia, the GDP growth in Armenia in 2017 will be 3.2-4.4%, according to the IMF forecast - 2.9%, according to Fitch forecast - 2.1%, EDB - 2.9% and Asian Development Bank - 2 , 2%. According to the National Statistical Service of Armenia, Armenia's GDP grew by 0.2% in 2016 to 5.068 trillion drams ($ 10.5 billion), against 3% growth in 2015, against which the foreign trade turnover grew by 7.4%, in particular exports - By 20%, and imports by 1.6%. The state debt of the Republic of Armenia increased by 16% (up to $ 5.9 bn) in 2016, and external - by 11% (up to $ 4.8 bn), and internal - by 49.3% (up to $ 1.14 bn).