ArmInfo. According to the new World Bank forecast, the service sector and the industrial sector will act as drivers of GDP growth in Armenia in 2019-2021, and the agricultural sector will emerge from the recession and accelerate the ascent. This is noted in the WB economic report published on October 9, "Migration and Brain Drain. World Bank Europe and Central Asia Economic Update''.
Armenia's baseline scenario envisages further economic growth in 2019, with real GDP estimated to rise by 5.5 percent. This will result from the growth of the service sector by 7.4% and the industrial sector by 4.1%, as well as the change of dynamics in the agricultural sector from decline by 0.5% growth. Then, in 2020, the expected GDP growth of Armenia by 5.1% will be dictated, according to the WB forecast, by the same increase in the services sector and industrial sector - by 5.4% and accelerated growth of the agricultural sector to 2.7%. And in 2021, the World Bank's forecasted GDP growth of 5.2% is based on expectations of a growth in the services sector by 5.4%, the industrial sector by 5.8% and a slowdown in the growth of the agricultural sector to 2.5%.
Consumption will remain strong, supported by additional stimulus from higher government spending, as the authorities compensate for spending under execution in the first half of the year. This will offset the weaker external environment. Continued structural reform and sound macroeconomic policy will keep inflation low and attract investment, supporting healthy GDP growth rates of over 5 percent over the medium term. As the economy continues to expand, labor income will rise. With sustained social transfers, poverty will maintain its decline, with the poverty rate dipping to around 7 percent by 2021. The over-performance of tax revenue will contain the budget deficit in 2019, to 0.5 percent of GDP. The deficit will rise to 2 percent in the medium term, affected also by the fiscal cost emerging from lower direct tax rates effective 2020. Modest fiscal deficits will drive a reduction in the debt-to-GDP ratio, to around 50 percent in 2021. The current account deficit will narrow gradually, falling from 9.4 percent of GDP in 2018 to 6.3 percent in 2021, supported by higher goods exports and tourism.
The risks related to the global growth outlook remain firmly to the downside. Lower oil prices could negatively impact Russia, one of Armenia's main economic partners, which would affect exports, putting pressure on the exchange rate and inflation. Domestically, addressing the still high poverty rate and low income over the medium term will require a concerted effort to restructure the economy toward a sustainable export-led growth path. Doing so will require an efficient government, better connectivity, reliable infrastructure, and investment in human capital. The strong commitment of the government to reduce corruption, improve the business environment, and make the country more attractive for investment provides an opportunity for a vibrant response from Armenia's private sector.
According to the RA Statistical Committee, in 2018, the GDP growth of Armenia slowed down to 5.2%, against the acceleration in 2017 to 7.5% from 0.2% in 2016. The drivers of economic growth in 2018 were the services sector and the trade sector (18.8% and 8.7% respectively), and to a lesser extent the construction sector and the industrial sector (4.5% and 4.3% respectively). At the same time, the energy complex grew insignificantly by 0.2%, while the agricultural sector lingered in decline (7.6%). The growth of foreign trade turnover in 2018 by 16.4% was largely supported by an increase in imports by 21.1% than in exports by 7.8%.