ArmInfo.The Central Bank of Armenia has improved its forecast for GDP growth for 2019 to 7-7.3% (7.2% on average) from the previous 6.7-7.2% (6.9% on average). As set out in the Central Bank's monetary policy program for the Q4 of 2019, published at the end of December, this is largely determined by domestic demand, especially by a high level of private expenses. Namely, it is noted that, given the growth of private consumption by 11.4% and the increase in gross fixed assets of the private sector by 1.2%, private spending will increase by 9.9%.
According to the Central Bank, in the medium term, in parallel with accelerating global economic growth and reducing global uncertainty, private investment will increase stimulating economic growth.
According to forecasts by the Central Bank, in 2020 the demand structure will change a bit and real growth in private consumption and imports will slow down, mainly due to a decrease in car imports, but the stimulating effect of exports on economic growth will intensify. In the short term, weak inflationary pressure will come from the real sector, the neutralization of which is expected at the end of the forecast period in the context of the current monetary policy.
The Central Bank improved its forecast for both import growth for 2019 to 4-6% from the previous 1-3%, and export growth to 9-11% from the previous 5-7%. The Central Bank further worsened the forecast for an increase in net inflow of remittances for 2019 - to 0-2% (against the previous forecast range of 1-3%). For 2020, the Central Bank predicts a recovery in the growth rate of money transfers by individuals to 7-9% due to the positive growth trends in the Russian economy. In export in 2020, the Central Bank expects a slowdown in growth to 6-8%, and in imports - declining rates to 0-3%.
With such a development of the economy and foreign trade, the ratio of the current account deficit to GDP will be 7-8% in 2019, which repeats the previous forecast of the Central Bank, and in 2020 it will decrease to 4-6%. In the medium term, as previously predicted, due to the progressive growth of exports, it will stabilize in the range of 3-5%.
The Central Bank, given the downward trend in unemployment since 2019, revised its forecast for this indicator, expecting 18.9%, and taking into account the subsequent annual decline in the medium term by 0.2-0.5 percentage points, the level of 17.3% is possible. Nominal wages in the private sector will increase by 3.9% in 2019, and in 2020, due to an increase in the minimum wage threshold, the growth will amount to 8.1%.
To note, according to the updated this December World Bank forecast for 2019, GDP growth in Armenia will be 6.9%, compared to previously projected 5.5%. The state budget of the Republic of Armenia for 2019 contains a growth of GDP of 4.9%, but according to the expectations of the government, GDP growth will be about 7%. According to the IMF forecast, Armenia's GDP growth in 2019 will be 4.6%. According to the Central Bank of Armenia, the inflow of transfers of individuals to Armenia slowed down the growth in 2018 to 1.7% from 14.6% in 2017, amounting to $ 1.786 billion. At the same time, the growth rate of the outflow of transfers slowed slightly - from 21.2% in 2017 to 20, 1% in 2018, amounting to $ 1.188 billion. This worsened the dynamics of the net inflow of transfers from 7.1% growth in 2017 to 22.1% decline in 2018, forming at the level of $ 597.2 million. Russia's share in the inflow decreased in 2018 from 60.6% to 58.8%, and in outflow, on the contrary, increased from 38% to 39.7%.
According to the RA Statistical Committee, in 2018, the GDP growth of Armenia slowed down to 5.2% from 7.5% in 2017, amounting to 6.005 trillion drams ($ 12.4 billion). The GDP deflator index in 2018 amounted to 102.5%, against 102.1% in 2017. The service sector, the trade sector and the industrial sector dominate in terms of volume, but only the service sector remained in terms of growth in drivers. According to the results of January-October 2019, economic activity in Armenia increased by 7.1% per annum and the services sector (15.1%), trade (8.9%) and the industrial sector (8.8%) acted as growth drivers.